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 	Unconstitutional or PreemptedPrior Version Limited on Constitutional Grounds by O’Connell v. Corcoran, N.Y., Nov. 20, 2003
 	KeyCite Yellow Flag - Negative TreatmentProposed Legislation
McKinney’s Consolidated Laws of New York Annotated 
Domestic Relations Law (Refs & Annos)
Chapter 14. Of the Consolidated Laws (Refs & Annos)
Article 13. Provisions Applicable to More than One Type of Matrimonial Action (Refs & Annos)
McKinney’s DRL § 236
§ 236. Special controlling provisions; prior actions or proceedings; new actions or proceedings[Statutory Text]
Effective: October 25, 2021
Currentness

<[Text of section, commentary, historical notes and references for Domestic Relations Law § 236 are displayed in this document. For Notes of Decisions, see Domestic Relations Law § 236, post.]>

Except as otherwise expressly provided in this section, the provisions of part A shall be controlling with respect to any action or proceeding commenced prior to the date on which the provisions of this section as amended become effective1 and the provisions of part B shall be controlling with respect to any action or proceeding commenced on or after such effective date. Any reference to this section or the provisions hereof in any action, proceeding, judgment, order, rule or agreement shall be deemed and construed to refer to either the provisions of part A or part B respectively and exclusively, determined as provided in this paragraph any inconsistent provision of law notwithstanding.
 
PART A
PRIOR ACTIONS OR PROCEEDINGS

Alimony, temporary and permanent. 1. Alimony. In any action or proceeding brought (1) during the lifetime of both parties to the marriage to annul a marriage or declare the nullity of a void marriage, or (2) for a separation, or (3) for a divorce, the court may direct either spouse to provide suitably for the support of the other as, in the court’s discretion, justice requires, having regard to the length of time of the marriage, the ability of each spouse to be self supporting, the circumstances of the case and of the respective parties. Such direction may require the payment of a sum or sums of money either directly to either spouse or to third persons for real and personal property and services furnished to either spouse, or for the rental of or mortgage amortization or interest payments, insurance, taxes, repairs or other carrying charges on premises occupied by either spouse, or for both payments to either spouse and to such third persons. Such direction shall be effective as of the date of the application therefor, and any retroactive amount of alimony due shall be paid in one sum or periodic sums, as the court shall direct, taking into account any amount of temporary alimony which has been paid. Such direction may be made in the final judgment in such action or proceeding, or by one or more orders from time to time before or subsequent to final judgment, or by both such order or orders and the final judgment. Such direction may be made notwithstanding that the parties continue to reside in the same abode and notwithstanding that the court refuses to grant the relief requested by either spouse (1) by reason of a finding by the court that a divorce, annulment or judgment declaring the marriage a nullity had previously been granted to either spouse in an action in which jurisdiction over the person of the other spouse was not obtained, or (2) by reason of the misconduct of the other spouse, unless such misconduct would itself constitute grounds for separation or divorce, or (3) by reason of a failure of proof of the grounds of either spouse’s action or counterclaim. Any order or judgment made as in this section provided may combine in one lump sum any amount payable to either spouse under this section with any amount payable to either spouse under section two hundred forty of this chapter. Upon the application of either spouse, upon such notice to the other party and given in such manner as the court shall direct, the court may annul or modify any such direction, whether made by order or by final judgment, or in case no such direction shall have been made in the final judgment may, with respect to any judgment of annulment or declaring the nullity of a void marriage rendered on or after September first, nineteen hundred forty or any judgment of separation or divorce whenever rendered, amend the judgment by inserting such direction. Subject to the provisions of section two hundred forty-four of this chapter, no such modification or annulment shall reduce or annul arrears accrued prior to the making of such application unless the defaulting party shows good cause for failure to make application for relief from the judgment or order directing such payment prior to the accrual of such arrears. Such modification may increase such support nunc pro tunc based on newly discovered evidence.

2. Compulsory financial disclosure. In all matrimonial actions and proceedings commenced on or after September first, nineteen hundred seventy-five in supreme court in which alimony, maintenance or support is in issue and all support proceedings in family court, there shall be compulsory disclosure by both parties of their respective financial states. No showing of special circumstances shall be required before such disclosure is ordered. A sworn statement of net worth shall be provided upon receipt of a notice in writing demanding the same, within twenty days after the receipt thereof. In the event said statement is not demanded, it shall be filed by each party, within ten days after joinder of issue, in the court in which the procedure is pending. As used in this section, the term net worth shall mean the amount by which total assets including income exceed total liabilities including fixed financial obligations. It shall include all income and assets of whatsoever kind and nature and wherever situated and shall include a list of all assets transferred in any manner during the preceding three years, or the length of the marriage, whichever is shorter; provided, however that transfers in the routine course of business which resulted in an exchange of assets of substantially equivalent value need not be specifically disclosed where such assets are otherwise identified in the statement of net worth. Noncompliance shall be punishable by any or all of the penalties prescribed in section thirty-one hundred twenty-six of the civil practice law and rules, in examination before or during trial.
 
PART B
NEW ACTIONS OR PROCEEDINGS

Maintenance and distributive award. 1. Definitions. Whenever used in this part, the following terms shall have the respective meanings hereinafter set forth or indicated:

a. The term “maintenance” shall mean payments provided for in a valid agreement between the parties or awarded by the court in accordance with the provisions of subdivisions five-a and six of this part, to be paid at fixed intervals for a definite or indefinite period of time, but an award of maintenance shall terminate upon the death of either party or upon the payee’s valid or invalid marriage, or upon modification pursuant to paragraph b of subdivision nine of this part or section two hundred forty-eight of this chapter.

b. The term “distributive award” shall mean payments provided for in a valid agreement between the parties or awarded by the court, in lieu of or to supplement, facilitate or effectuate the division or distribution of property where authorized in a matrimonial action, and payable either in a lump sum or over a period of time in fixed amounts. Distributive awards shall not include payments which are treated as ordinary income to the recipient under the provisions of the United States Internal Revenue Code.

c. The term “marital property” shall mean all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held, except as otherwise provided in agreement pursuant to subdivision three of this part. Marital property shall not include separate property as hereinafter defined.

d. The term separate property shall mean:

(1) property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse;

(2) compensation for personal injuries;

(3) property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse;

(4) property described as separate property by written agreement of the parties pursuant to subdivision three of this part.

e. The term “custodial parent” shall mean a parent to whom custody of a child or children is granted by a valid agreement between the parties or by an order or decree of a court.

f. The term “child support” shall mean a sum paid pursuant to court order or decree by either or both parents or pursuant to a valid agreement between the parties for care, maintenance and education of any unemancipated child under the age of twenty-one years.

2. Matrimonial actions. a. Except as provided in subdivision five of this part, the provisions of this part shall be applicable to actions for an annulment or dissolution of a marriage, for a divorce, for a separation, for a declaration of the nullity of a void marriage, for a declaration of the validity or nullity of a foreign judgment of divorce, for a declaration of the validity or nullity of a marriage, and to proceedings to obtain maintenance or a distribution of marital property following a foreign judgment of divorce, commenced on and after the effective date of this part. Any application which seeks a modification of a judgment, order or decree made in an action commenced prior to the effective date of this part shall be heard and determined in accordance with the provisions of part A of this section.

b. With respect to matrimonial actions which commence on or after the effective date of this paragraph, the plaintiff shall cause to be served upon the defendant, simultaneous with the service of the summons, a copy of the automatic orders set forth in this paragraph. The automatic orders shall be binding upon the plaintiff in a matrimonial action immediately upon the filing of the summons, or summons and complaint, and upon the defendant immediately upon the service of the automatic orders with the summons. The automatic orders shall remain in full force and effect during the pendency of the action, unless terminated, modified or amended by further order of the court upon motion of either of the parties or upon written agreement between the parties duly executed and acknowledged. The automatic orders are as follows:

(1) Neither party shall sell, transfer, encumber, conceal, assign, remove or in any way dispose of, without the consent of the other party in writing, or by order of the court, any property (including, but not limited to, real estate, personal property, cash accounts, stocks, mutual funds, bank accounts, cars and boats) individually or jointly held by the parties, except in the usual course of business, for customary and usual household expenses or for reasonable attorney’s fees in connection with this action.

(2) Neither party shall transfer, encumber, assign, remove, withdraw or in any way dispose of any tax deferred funds, stocks or other assets held in any individual retirement accounts, 401K accounts, profit sharing plans, Keogh accounts, or any other pension or retirement account, and the parties shall further refrain from applying for or requesting the payment of retirement benefits or annuity payments of any kind, without the consent of the other party in writing, or upon further order of the court; except that any party who is already in pay status may continue to receive such payments thereunder.

(3) Neither party shall incur unreasonable debts hereafter, including, but not limited to further borrowing against any credit line secured by the family residence, further encumbrancing any assets, or unreasonably using credit cards or cash advances against credit cards, except in the usual course of business or for customary or usual household expenses, or for reasonable attorney’s fees in connection with this action.

(4) Neither party shall cause the other party or the children of the marriage to be removed from any existing medical, hospital and dental insurance coverage, and each party shall maintain the existing medical, hospital and dental insurance coverage in full force and effect.

(5) Neither party shall change the beneficiaries of any existing life insurance policies, and each party shall maintain the existing life insurance, automobile insurance, homeowners and renters insurance policies in full force and effect.

3. Agreement of the parties. An agreement by the parties, made before or during the marriage, shall be valid and enforceable in a matrimonial action if such agreement is in writing, subscribed by the parties, and acknowledged or proven in the manner required to entitle a deed to be recorded. Notwithstanding any other provision of law, an acknowledgment of an agreement made before marriage may be executed before any person authorized to solemnize a marriage pursuant to subdivisions one, two and three of section eleven of this chapter. Such an agreement may include (1) a contract to make a testamentary provision of any kind, or a waiver of any right to elect against the provisions of a will; (2) provision for the ownership, division or distribution of separate and marital property; (3) provision for the amount and duration of maintenance or other terms and conditions of the marriage relationship, subject to the provisions of section 5-311 of the general obligations law, and provided that such terms were fair and reasonable at the time of the making of the agreement and are not unconscionable at the time of entry of final judgment; and (4) provision for the custody, care, education and maintenance of any child of the parties, subject to the provisions of section two hundred forty of this article. Nothing in this subdivision shall be deemed to affect the validity of any agreement made prior to the effective date of this subdivision.

4. Compulsory financial disclosure. a. In all matrimonial actions and proceedings in which alimony, maintenance or support is in issue, there shall be compulsory disclosure by both parties of their respective financial states. No showing of special circumstances shall be required before such disclosure is ordered. A sworn statement of net worth shall be provided upon receipt of a notice in writing demanding the same, within twenty days after the receipt thereof. In the event said statement is not demanded, it shall be filed with the clerk of the court by each party, within ten days after joinder of issue, in the court in which the proceeding is pending. As used in this part, the term “net worth” shall mean the amount by which total assets including income exceed total liabilities including fixed financial obligations. It shall include all income and assets of whatsoever kind and nature and wherever situated and shall include a list of all assets transferred in any manner during the preceding three years, or the length of the marriage, whichever is shorter; provided, however that transfers in the routine course of business which resulted in an exchange of assets of substantially equivalent value need not be specifically disclosed where such assets are otherwise identified in the statement of net worth. All such sworn statements of net worth shall be accompanied by a current and representative paycheck stub and the most recently filed state and federal income tax returns including a copy of the W-2(s) wage and tax statement(s) submitted with the returns. In addition, both parties shall provide information relating to any and all group health plans available to them for the provision of care or other medical benefits by insurance or otherwise for the benefit of the child or children for whom support is sought, including all such information as may be required to be included in a qualified medical child support order as defined in section six hundred nine of the employee retirement income security act of 1974 (29 USC 1169) including, but not limited to: (i) the name and last known mailing address of each party and of each dependent to be covered by the order; (ii) the identification and a description of each group health plan available for the benefit or coverage of the disclosing party and the child or children for whom support is sought; (iii) a detailed description of the type of coverage available from each group health plan for the potential benefit of each such dependent; (iv) the identification of the plan administrator for each such group health plan and the address of such administrator; (v) the identification numbers for each such group health plan; and (vi) such other information as may be required by the court. Noncompliance shall be punishable by any or all of the penalties prescribed in section thirty-one hundred twenty-six of the civil practice law and rules, in examination before or during trial.

b. As soon as practicable after a matrimonial action has been commenced, the court shall set the date or dates the parties shall use for the valuation of each asset. The valuation date or dates may be anytime from the date of commencement of the action to the date of trial.

5. Disposition of property in certain matrimonial actions. a. Except where the parties have provided in an agreement for the disposition of their property pursuant to subdivision three of this part, the court, in an action wherein all or part of the relief granted is divorce, or the dissolution, annulment or declaration of the nullity of a marriage, and in proceedings to obtain a distribution of marital property following a foreign judgment of divorce, shall determine the respective rights of the parties in their separate or marital property, and shall provide for the disposition thereof in the final judgment.

b. Separate property shall remain such.

c. Marital property shall be distributed equitably between the parties, considering the circumstances of the case and of the respective parties.

d. In determining an equitable disposition of property under paragraph c, the court shall consider:

(1) the income and property of each party at the time of marriage, and at the time of the commencement of the action;

(2) the duration of the marriage and the age and health of both parties;

(3) the need of a custodial parent to occupy or own the marital residence and to use or own its household effects;

(4) the loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution;

(5) the loss of health insurance benefits upon dissolution of the marriage;

(6) any award of maintenance under subdivision six of this part;

(7) any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party. The court shall not consider as marital property subject to distribution the value of a spouse’s enhanced earning capacity arising from a license, degree, celebrity goodwill, or career enhancement. However, in arriving at an equitable division of marital property, the court shall consider the direct or indirect contributions to the development during the marriage of the enhanced earning capacity of the other spouse;

(8) the liquid or non-liquid character of all marital property;

(9) the probable future financial circumstances of each party;

(10) the impossibility or difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest intact and free from any claim or interference by the other party;

(11) the tax consequences to each party;

(12) the wasteful dissipation of assets by either spouse;

(13) any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;

(14) whether either party has committed an act or acts of domestic violence, as described in subdivision one of section four hundred fifty-nine-a of the social services law, against the other party and the nature, extent, duration and impact of such act or acts;

(15) in awarding the possession of a companion animal, the court shall consider the best interest of such animal. “Companion animal”, as used in this subparagraph, shall have the same meaning as in subdivision five of section three hundred fifty of the agriculture and markets law; and

(16) any other factor which the court shall expressly find to be just and proper.

e. In any action in which the court shall determine that an equitable distribution is appropriate but would be impractical or burdensome or where the distribution of an interest in a business, corporation or profession would be contrary to law, the court in lieu of such equitable distribution shall make a distributive award in order to achieve equity between the parties. The court in its discretion, also may make a distributive award to supplement, facilitate or effectuate a distribution of marital property.

f. In addition to the disposition of property as set forth above, the court may make such order regarding the use and occupancy of the marital home and its household effects as provided in section two hundred thirty-four of this chapter, without regard to the form of ownership of such property.

g. In any decision made pursuant to this subdivision, the court shall set forth the factors it considered and the reasons for its decision and such may not be waived by either party or counsel.

h. In any decision made pursuant to this subdivision the court shall, where appropriate, consider the effect of a barrier to remarriage, as defined in subdivision six of section two hundred fifty-three of this article, on the factors enumerated in paragraph d of this subdivision.

5-a. Temporary maintenance awards. a. Except where the parties have entered into an agreement providing for maintenance pursuant to subdivision three of this part, in any matrimonial action the court, upon application by a party, shall make its award for temporary maintenance pursuant to the provisions of this subdivision.

b. For purposes of this subdivision, the following definitions shall be used:

(1) “Payor” shall mean the spouse with the higher income.

(2) “Payee” shall mean the spouse with the lower income.

(3) “Length of marriage” shall mean the period from the date of marriage until the date of commencement of action.

(4) “Income” shall mean income as defined in the child support standards act and codified in section two hundred forty of this article and section four hundred thirteen of the family court act without subtracting alimony or maintenance actually paid or to be paid to a spouse that is a party to the instant action pursuant to subclause (C) of clause (vii) of subparagraph five of paragraph (b) of subdivision one-b of section two hundred forty of this article and subclause (C) of clause (vii) of subparagraph five of paragraph (b) of subdivision one of section four hundred thirteen of the family court act and without subtracting spousal support paid pursuant to section four hundred twelve of such act.

(5) “Income cap” shall mean up to and including one hundred eighty-four thousand dollars of the payor’s annual income; provided, however, beginning March first, two thousand twenty and every two years thereafter, the income cap amount shall increase by the sum of the average annual percentage changes in the consumer price index for all urban consumers (CPI-U) as published by the United States department of labor bureau of labor statistics for the prior two years multiplied by the then income cap and then rounded to the nearest one thousand dollars. The office of court administration shall determine and publish the income cap.

(6) “Guideline amount of temporary maintenance” shall mean the dollar amount derived by the application of paragraph c or d of this subdivision.

(7) “Self-support reserve” shall mean the self-support reserve as defined in the child support standards act and codified in section two hundred forty of this article and section four hundred thirteen of the family court act.

(8) “Agreement” shall have the same meaning as provided in subdivision three of this part.

c. Where the payor’s income is lower than or equal to the income cap, the court shall determine the guideline amount of temporary maintenance as follows:

(1) Where child support will be paid for children of the marriage and where the payor as defined in this subdivision is also the non-custodial parent pursuant to the child support standards act:

(a) the court shall subtract twenty-five percent of the payee’s income from twenty percent of the payor’s income.

(b) the court shall then multiply the sum of the payor’s income and the payee’s income by forty percent.

(c) the court shall subtract the payee’s income from the amount derived from clause (b) of this subparagraph.

(d) the court shall determine the lower of the two amounts derived by clauses (a) and (c) of this subparagraph.

(e) the guideline amount of temporary maintenance shall be the amount determined by clause (d) of this subparagraph except that, if the amount determined by clause (d) of this subparagraph is less than or equal to zero, the guideline amount of temporary maintenance shall be zero dollars.

(f) temporary maintenance shall be calculated prior to child support because the amount of temporary maintenance shall be subtracted from the payor’s income and added to the payee’s income as part of the calculation of the child support obligation.

(2) Where child support will not be paid for children of the marriage, or where child support will be paid for children of the marriage but the payor as defined in this subdivision is the custodial parent pursuant to the child support standards act:

(a) the court shall subtract twenty percent of the payee’s income from thirty percent of the payor’s income.

(b) the court shall then multiply the sum of the payor’s income and the payee’s income by forty percent.

(c) the court shall subtract the payee’s income from the amount derived from clause (b) of this subparagraph.

(d) the court shall determine the lower of the two amounts derived by clauses (a) and (c) of this subparagraph.

(e) the guideline amount of temporary maintenance shall be the amount determined by clause (d) of this subparagraph except that, if the amount determined by clause (d) of this subparagraph is less than or equal to zero, the guideline amount of temporary maintenance shall be zero dollars.

(f) if child support will be paid for children of the marriage but the payor as defined in this subdivision is the custodial parent pursuant to the child support standards act, temporary maintenance shall be calculated prior to child support because the amount of temporary maintenance shall be subtracted from the payor’s income pursuant to this subdivision and added to the payee’s income pursuant to this subdivision as part of the calculation of the child support obligation.

d. Where the payor’s income exceeds the income cap, the court shall determine the guideline amount of temporary maintenance as follows:

(1) the court shall perform the calculations set forth in paragraph c of this subdivision for the income of the payor up to and including the income cap; and

(2) for income exceeding the cap, the amount of additional maintenance awarded, if any, shall be within the discretion of the court which shall take into consideration any one or more of the factors set forth in subparagraph one of paragraph h of this subdivision; and

(3) the court shall set forth the factors it considered and the reasons for its decision in writing or on the record. Such decision, whether in writing or on the record, may not be waived by either party or counsel.

e. Notwithstanding the provisions of this subdivision, where the guideline amount of temporary maintenance would reduce the payor’s income below the self-support reserve for a single person, the guideline amount of temporary maintenance shall be the difference between the payor’s income and the self-support reserve. If the payor’s income is below the self-support reserve, there shall be a rebuttable presumption that no temporary maintenance is awarded.

f. The court shall determine the duration of temporary maintenance by considering the length of the marriage.

g. Temporary maintenance shall terminate no later than the issuance of the judgment of divorce or the death of either party, whichever occurs first.

h. (1) The court shall order the guideline amount of temporary maintenance up to the income cap in accordance with paragraph c of this subdivision, unless the court finds that the guideline amount of temporary maintenance is unjust or inappropriate, which finding shall be based upon consideration of any one or more of the following factors, and adjusts the guideline amount of temporary maintenance accordingly based upon such consideration:

(a) the age and health of the parties;

(b) the present or future earning capacity of the parties, including a history of limited participation in the workforce;

(c) the need of one party to incur education or training expenses;

(d) the termination of a child support award during the pendency of the temporary maintenance award when the calculation of temporary maintenance was based upon child support being awarded and which resulted in a maintenance award lower than it would have been had child support not been awarded;

(e) the wasteful dissipation of marital property, including transfers or encumbrances made in contemplation of a matrimonial action without fair consideration;

(f) the existence and duration of a pre-marital joint household or a pre-divorce separate household;

(g) acts by one party against another that have inhibited or continue to inhibit a party’s earning capacity or ability to obtain meaningful employment. Such acts include but are not limited to acts of domestic violence as provided in section four hundred fifty-nine-a of the social services law;

(h) the availability and cost of medical insurance for the parties;

(i) the care of children or stepchildren, disabled adult children or stepchildren, elderly parents or in-laws provided during the marriage that inhibits a party’s earning capacity;

(j) the tax consequences to each party;

(k) the standard of living of the parties established during the marriage;

(l) the reduced or lost earning capacity of the payee as a result of having forgone or delayed education, training, employment or career opportunities during the marriage; and

(m) any other factor which the court shall expressly find to be just and proper.

(2) Where the court finds that the guideline amount of temporary maintenance is unjust or inappropriate and the court adjusts the guideline amount of temporary maintenance pursuant to this paragraph, the court shall set forth, in a written decision or on the record, the guideline amount of temporary maintenance, the factors it considered, and the reasons that the court adjusted the guideline amount of temporary maintenance. Such decision, whether in writing or on the record, shall not be waived by either party or counsel.

(3) Where either or both parties are unrepresented, the court shall not enter a temporary maintenance order unless the court informs the unrepresented party or parties of the guideline amount of temporary maintenance.

i. Nothing contained in this subdivision shall be construed to alter the rights of the parties to voluntarily enter into agreements or stipulations as defined in subdivision three of this part which deviate from the presumptive award of temporary maintenance.

j. When a payor has defaulted and/or the court is otherwise presented with insufficient evidence to determine income, the court shall order the temporary maintenance award based upon the needs of the payee or the standard of living of the parties prior to commencement of the divorce action, whichever is greater. Such order may be retroactively modified upward without a showing of change in circumstances upon a showing of newly discovered evidence.

k. In any action or proceeding for modification of an order of maintenance or alimony existing prior to the effective date of this subdivision, brought pursuant to this article, the temporary maintenance guidelines set forth in this subdivision shall not constitute a change of circumstances warranting modification of such support order.

l. In any action or proceeding for modification where the parties have entered into an agreement providing for maintenance pursuant to subdivision three of this part entered into prior to the effective date of this subdivision, brought pursuant to this article, the temporary maintenance guidelines set forth in this subdivision shall not constitute a change of circumstances warranting modification of such support order.

m. In determining temporary maintenance, the court shall consider and allocate, where appropriate, the responsibilities of the respective spouses for the family’s expenses during the pendency of the proceeding.

n. The temporary maintenance order shall not prejudice the rights of either party regarding a post-divorce maintenance award.

6. Post-divorce maintenance awards. a. Except where the parties have entered into an agreement pursuant to subdivision three of this part providing for maintenance, in any matrimonial action, the court, upon application by a party, shall make its award for post-divorce maintenance pursuant to the provisions of this subdivision.

b. For purposes of this subdivision, the following definitions shall be used:

(1) “Payor” shall mean the spouse with the higher income.

(2) “Payee” shall mean the spouse with the lower income.

(3) “Income” shall mean:

(a) income as defined in the child support standards act and codified in section two hundred forty of this article and section four hundred thirteen of the family court act, without subtracting alimony or maintenance actually paid or to be paid to a spouse that is a party to the instant action pursuant to subclause (C) of clause (vii) of subparagraph five of paragraph (b) of subdivision one-b of section two hundred forty of this article and subclause (C) of clause (vii) of subparagraph five of paragraph (b) of subdivision one of section four hundred thirteen of the family court act and without subtracting spousal support paid pursuant to section four hundred twelve of such act; and

(b) income from income-producing property distributed or to be distributed pursuant to subdivision five of this part.

(4) “Income cap” shall mean up to and including one hundred eighty-four thousand dollars of the payor’s annual income; provided, however, beginning March first, two thousand twenty and every two years thereafter, the income cap amount shall increase by the sum of the average annual percentage changes in the consumer price index for all urban consumers (CPI-U) as published by the United States department of labor bureau of labor statistics for the prior two years multiplied by the then income cap and then rounded to the nearest one thousand dollars. The office of court administration shall determine and publish the income cap.

(5) “Guideline amount of post-divorce maintenance” shall mean the dollar amount derived by the application of paragraph c or d of this subdivision.

(6) “Guideline duration of post-divorce maintenance” shall mean the durational period determined by the application of paragraph f of this subdivision.

(7) “Post-divorce maintenance guideline obligation” shall mean the guideline amount of post-divorce maintenance and the guideline duration of post-divorce maintenance.

(8) “Length of marriage” shall mean the period from the date of marriage until the date of commencement of the action.

(9) “Self-support reserve” shall mean the self-support reserve as defined in the child support standards act and codified in section two hundred forty of this article and section four hundred thirteen of the family court act.

(10) “Agreement” shall have the same meaning as provided in subdivision three of this part.

c. Where the payor’s income is lower than or equal to the income cap, the court shall determine the guideline amount of post-divorce maintenance as follows:

(1) Where child support will be paid for children of the marriage and where the payor as defined in this subdivision is also the non-custodial parent pursuant to the child support standards act:

(a) the court shall subtract twenty-five percent of the payee’s income from twenty percent of the payor’s income.

(b) the court shall then multiply the sum of the payor’s income and the payee’s income by forty percent.

(c) the court shall subtract the payee’s income from the amount derived from clause (b) of this subparagraph.

(d) the court shall determine the lower of the two amounts derived by clauses (a) and (c) of this subparagraph.

(e) the guideline amount of post-divorce maintenance shall be the amount determined by clause (d) of this subparagraph except that, if the amount determined by clause (d) of this subparagraph is less than or equal to zero, the guideline amount of post-divorce maintenance shall be zero dollars.

(f) notwithstanding the provisions of this subdivision, where the guideline amount of post-divorce maintenance would reduce the payor’s income below the self-support reserve for a single person, the guideline amount of post-divorce maintenance shall be the difference between the payor’s income and the self-support reserve. If the payor’s income is below the self-support reserve, there shall be a rebuttable presumption that no post-divorce maintenance is awarded.

(g) maintenance shall be calculated prior to child support because the amount of maintenance shall be subtracted from the payor’s income and added to the payee’s income as part of the calculation of the child support obligation.

(2) Where child support will not be paid for children of the marriage, or where child support will be paid for children of the marriage but the payor as defined in this subdivision is the custodial parent pursuant to the child support standards act:

(a) the court shall subtract twenty percent of the payee’s income from thirty percent of the payor’s income.

(b) the court shall then multiply the sum of the payor’s income and the payee’s income by forty percent.

(c) the court shall subtract the payee’s income from the amount derived from clause (b) of this subparagraph.

(d) the court shall determine the lower of the two amounts derived by clauses (a) and (c) of this subparagraph.

(e) the guideline amount of post-divorce maintenance shall be the amount determined by clause (d) of this subparagraph except that, if the amount determined by clause (d) of this subparagraph is less than or equal to zero, the guideline amount of post-divorce maintenance shall be zero dollars.

(f) if child support will be paid for children of the marriage but the payor as defined in this subdivision is the custodial parent pursuant to the child support standards act, post-divorce maintenance shall be calculated prior to child support because the amount of post-divorce maintenance shall be subtracted from the payor’s income pursuant to this subdivision and added to the payee’s income pursuant to this subdivision as part of the calculation of the child support obligation.

(g) notwithstanding the provisions of this subdivision, where the guideline amount of post-divorce maintenance would reduce the payor’s income below the self-support reserve for a single person, the guideline amount of post-divorce maintenance shall be the difference between the payor’s income and the self-support reserve. If the payor’s income is below the self-support reserve, there shall be a rebuttable presumption that no post-divorce maintenance is awarded.

d. Where the payor’s income exceeds the income cap, the court shall determine the guideline amount of post-divorce maintenance as follows:

(1) the court shall perform the calculations set forth in paragraph c of this subdivision for the income of payor up to and including the income cap; and

(2) for income exceeding the cap, the amount of additional maintenance awarded, if any, shall be within the discretion of the court which shall take into consideration any one or more of the factors set forth in subparagraph one of paragraph e of this subdivision; and

(3) the court shall set forth the factors it considered and the reasons for its decision in writing or on the record. Such decision, whether in writing or on the record, may not be waived by either party or counsel.

e. (1) The court shall order the post-divorce maintenance guideline obligation up to the income cap in accordance with paragraph c of this subdivision, unless the court finds that the post-divorce maintenance guideline obligation is unjust or inappropriate, which finding shall be based upon consideration of any one or more of the following factors, and adjusts the post-divorce maintenance guideline obligation accordingly based upon such consideration:

(a) the age and health of the parties;

(b) the present or future earning capacity of the parties, including a history of limited participation in the workforce;

(c) the need of one party to incur education or training expenses;

(d) the termination of a child support award before the termination of the maintenance award when the calculation of maintenance was based upon child support being awarded which resulted in a maintenance award lower than it would have been had child support not been awarded;

(e) the wasteful dissipation of marital property, including transfers or encumbrances made in contemplation of a matrimonial action without fair consideration;

(f) the existence and duration of a pre-marital joint household or a pre-divorce separate household;

(g) acts by one party against another that have inhibited or continue to inhibit a party’s earning capacity or ability to obtain meaningful employment. Such acts include but are not limited to acts of domestic violence as provided in section four hundred fifty-nine-a of the social services law;

(h) the availability and cost of medical insurance for the parties;

(i) the care of children or stepchildren, disabled adult children or stepchildren, elderly parents or in-laws provided during the marriage that inhibits a party’s earning capacity;

(j) the tax consequences to each party;

(k) the standard of living of the parties established during the marriage;

(l) the reduced or lost earning capacity of the payee as a result of having forgone or delayed education, training, employment or career opportunities during the marriage;

(m) the equitable distribution of marital property and the income or imputed income on the assets so distributed;

(n) the contributions and services of the payee as a spouse, parent, wage earner and homemaker and to the career or career potential of the other party; and

(o) any other factor which the court shall expressly find to be just and proper.

(2) Where the court finds that the post-divorce maintenance guideline obligation is unjust or inappropriate and the court adjusts the post-divorce maintenance guideline obligation pursuant to this paragraph, the court shall set forth, in a written decision or on the record, the unadjusted post-divorce maintenance guideline obligation, the factors it considered, and the reasons that the court adjusted the post-divorce maintenance obligation. Such decision shall not be waived by either party or counsel.

f. The duration of post-divorce maintenance may be determined as follows:

(1) The court may determine the duration of post-divorce maintenance in accordance with the following advisory schedule:

Length of the marriage
 
	Percent of the length of the marriage for which maintenance will be payable

0 up to and including 15 years
 
	15%--30%

More than 15 up to and including 20 years
 
	30%--40%

More than 20 years
 
	35%--50%

(2) In determining the duration of post-divorce maintenance, whether or not the court utilizes the advisory schedule, it shall consider the factors listed in subparagraph one of paragraph e of this subdivision and shall set forth, in a written decision or on the record, the factors it considered. Such decision shall not be waived by either party or counsel. Nothing herein shall prevent the court from awarding non-durational maintenance in an appropriate case.

(3) Notwithstanding the provisions of subparagraph one of this paragraph, post-divorce maintenance shall terminate upon the death of either party or upon the payee’s valid or invalid marriage, or upon modification pursuant to paragraph b of subdivision nine of this part or section two hundred forty-eight of this article.

(4) Notwithstanding the provisions of subparagraph one of this paragraph, when determining duration of post-divorce maintenance, the court shall take into consideration anticipated retirement assets, benefits, and retirement eligibility age of both parties if ascertainable at the time of decision. If not ascertainable at the time of decision, the actual full or partial retirement of the payor with substantial diminution of income shall be a basis for a modification of the award.

g. Where either or both parties are unrepresented, the court shall not enter a maintenance order or judgment unless the court informs the unrepresented party or parties of the post-divorce maintenance guideline obligation.

h. Nothing contained in this subdivision shall be construed to alter the rights of the parties to voluntarily enter into validly executed agreements or stipulations which deviate from the post-divorce maintenance guideline obligation.

i. When a payor has defaulted and/or the court makes a finding at the time of trial that it was presented with insufficient evidence to determine income, the court shall order the post-divorce maintenance based upon the needs of the payee or the standard of living of the parties prior to commencement of the divorce action, whichever is greater. Such order may be retroactively modified upward without a showing of change in circumstances upon a showing of substantial newly discovered evidence.

j. Post-divorce maintenance may be modified pursuant to paragraph b of subdivision nine of this part.

k. In any action or proceeding for modification of an order of maintenance or alimony existing prior to the effective date of the chapter of the laws of two thousand fifteen which amended this subdivision, brought pursuant to this article, the guidelines for post-divorce maintenance set forth in this subdivision shall not constitute a change of circumstances warranting modification of such support order.

l. In any action or proceeding for modification where the parties have entered into an agreement providing for maintenance pursuant to subdivision three of this part entered into prior to the effective date of the chapter of the laws of two thousand fifteen which amended this subdivision, brought pursuant to this article, the guidelines for post-divorce maintenance set forth in this subdivision shall not constitute a change of circumstances warranting modification of such agreement.

m. In any action or proceeding for modification of an order of maintenance or alimony existing prior to the effective date of the chapter of the laws of two thousand fifteen which amended this subdivision, brought pursuant to this article, the guidelines for post-divorce maintenance set forth in paragraphs c, d and e of this subdivision shall not apply.

n. In any action or proceeding for modification where the parties have entered into an agreement providing for maintenance pursuant to subdivision three of this part entered into prior to the effective date of the chapter of the laws of two thousand fifteen which amended this subdivision, brought pursuant to this article, the guidelines for post-divorce maintenance set forth in paragraphs c, d and e of this subdivision shall not apply.

o. In any decision made pursuant to this subdivision the court shall, where appropriate, consider the effect of a barrier to remarriage, as defined in subdivision six of section two hundred fifty-three of this article, on the factors enumerated in paragraph e of this subdivision.

6-a. Law revision commission study. a. The legislature hereby finds and declares it to be the policy of the state that it is necessary to achieve equitable outcomes when families divorce and it is important to ensure that the economic consequences of a divorce are fairly shared by divorcing couples. Serious concerns have been raised that the implementation of New York state’s maintenance laws have not resulted in equitable results. Maintenance is often not granted and where it is granted, the results are inconsistent and unpredictable. This raises serious concerns about the ability of our current maintenance laws to achieve equitable and fair outcomes.

The legislature further finds a comprehensive review of the provisions of our state’s maintenance laws should be undertaken. It has been thirty years since the legislature significantly reformed our state’s divorce laws by enacting equitable distribution of marital property and introduced the concept of maintenance to replace alimony. Concerns that the implementation of our maintenance laws have not resulted in equitable results compel the need for a review of these laws.

b. The law revision commission is hereby directed to:

(1) review and assess the economic consequences of divorce on the parties;

(2) review the maintenance laws of the state, including the way in which they are administered to determine the impact of these laws on post marital economic disparities, and the effectiveness of such laws and their administration in achieving the state’s policy goals and objectives of ensuring that the economic consequences of a divorce are fairly and equitably shared by the divorcing couple; and

(3) make recommendations to the legislature, including such proposed revisions of such laws as it determines necessary to achieve these goals and objectives.

c. The law revision commission shall make a preliminary report to the legislature and the governor of its findings, conclusions, and any recommendations not later than nine months from the effective date of this subdivision, and a final report of its findings, conclusions and recommendations not later than December thirty-first, two thousand eleven.

7. Child support. a. In any matrimonial action, or in an independent action for child support, the court as provided in section two hundred forty of this chapter shall order either or both parents to pay temporary child support or child support without requiring a showing of immediate or emergency need. The court shall make an order for temporary child support notwithstanding that information with respect to income and assets of either or both parents may be unavailable. Where such information is available, the court may make an order for temporary child support pursuant to section two hundred forty of this article. Such order shall, except as provided for herein, be effective as of the date of the application therefor, and any retroactive amount of child support due shall be support arrears/past due support and shall be paid in one sum or periodic sums, as the court shall direct, taking into account any amount of temporary child support which has been paid. In addition, such retroactive child support shall be enforceable in any manner provided by law including, but not limited to, an execution for support enforcement pursuant to subdivision (b) of section fifty-two hundred forty-one of the civil practice law and rules. When a child receiving support is a public assistance recipient, or the order of support is being enforced or is to be enforced pursuant to section one hundred eleven-g of the social services law, the court shall establish the amount of retroactive child support and notify the parties that such amount shall be enforced by the support collection unit pursuant to an execution for support enforcement as provided for in subdivision (b) of section fifty-two hundred forty-one of the civil practice law and rules, or in such periodic payments as would have been authorized had such an execution been issued. In such case, the court shall not direct the schedule of repayment of retroactive support. The court shall not consider the misconduct of either party but shall make its award for child support pursuant to section two hundred forty of this article.

b. Notwithstanding any other provision of law, any written application or motion to the court for the establishment of a child support obligation for persons not in receipt of family assistance must contain either a request for child support enforcement services which would authorize the collection of the support obligation by the immediate issuance of an income execution for support enforcement as provided for by this chapter, completed in the manner specified in section one hundred eleven-g of the social services law; or a statement that the applicant has applied for or is in receipt of such services; or a statement that the applicant knows of the availability of such services, has declined them at this time and where support enforcement services pursuant to section one hundred eleven-g of the social services law have been declined that the applicant understands that an income deduction order may be issued pursuant to subdivision (c) of section five thousand two hundred forty-two of the civil practice law and rules without other child support enforcement services and that payment of an administrative fee may be required. The court shall provide a copy of any such request for child support enforcement services to the support collection unit of the appropriate social services district any time it directs payments to be made to such support collection unit. Additionally, the copy of any such request shall be accompanied by the name, address and social security number of the parties; the date and place of the parties’ marriage; the name and date of birth of the child or children; and the name and address of the employers and income payors of the party from whom child support is sought. Unless the party receiving child support has applied for or is receiving such services, the court shall not direct such payments to be made to the support collection unit, as established in section one hundred eleven-h of the social services law.

c. The court shall direct that a copy of any child support or combined child and spousal support order issued by the court on or after the first day of October, nineteen hundred ninety-eight, in any proceeding under this section be provided promptly to the state case registry established pursuant to subdivision four-a of section one hundred eleven-b of the social services law.

d. Any child support order made by the court in any proceeding under the provisions of this section shall include, on its face, a notice printed or typewritten in a size equal to at least eight point bold type informing the parties of their right to seek a modification of the child support order upon a showing of:

(i) a substantial change in circumstances; or

(ii) that three years have passed since the order was entered, last modified or adjusted; or

(iii) there has been a change in either party’s gross income by fifteen percent or more since the order was entered, last modified, or adjusted; however, if the parties have specifically opted out of subparagraph (ii) or (iii) of this paragraph in a validly executed agreement or stipulation, then that basis to seek modification does not apply.

8. Special relief in matrimonial actions. a. In any matrimonial action the court may order a party to purchase, maintain or assign a policy of insurance providing benefits for health and hospital care and related services for either spouse or children of the marriage not to exceed such period of time as such party shall be obligated to provide maintenance, child support or make payments of a distributive award. The court may also order a party to purchase, maintain or assign a policy of accident insurance or insurance on the life of either spouse, and to designate in the case of life insurance, either spouse or children of the marriage, or in the case of accident insurance, the insured spouse as irrevocable beneficiaries during a period of time fixed by the court. The obligation to provide such insurance shall cease upon the termination of the spouse’s duty to provide maintenance, child support or a distributive award. A copy of such order shall be served, by registered mail, on the home office of the insurer specifying the name and mailing address of the spouse or children, provided that failure to so serve the insurer shall not affect the validity of the order.

b. In any action where the court has ordered temporary maintenance, maintenance, distributive award or child support, the court may direct that a payment be made directly to the other spouse or a third person for real and personal property and services furnished to the other spouse, or for the rental or mortgage amortization or interest payments, insurances, taxes, repairs or other carrying charges on premises occupied by the other spouse, or for both payments to the other spouse and to such third persons. Such direction may be made notwithstanding that the parties continue to reside in the same abode and notwithstanding that the court refuses to grant the relief requested by the other spouse.

c. Any order or judgment made as in this section provided may combine any amount payable to either spouse under this section with any amount payable to such spouse as child support or under section two hundred forty of this chapter.

9. Enforcement and modification of orders and judgments in matrimonial actions. a. All orders or judgments entered in matrimonial actions shall be enforceable pursuant to section fifty-two hundred forty-one or fifty-two hundred forty-two of the civil practice law and rules, or in any other manner provided by law. Orders or judgments for child support, alimony and maintenance shall also be enforceable pursuant to article fifty-two of the civil practice law and rules upon a debtor’s default as such term is defined in paragraph seven of subdivision (a) of section fifty-two hundred forty-one of the civil practice law and rules. The establishment of a default shall be subject to the procedures established for the determination of a mistake of fact for income executions pursuant to subdivision (e) of section fifty-two hundred forty-one of the civil practice law and rules. For the purposes of enforcement of child support orders or combined spousal and child support orders pursuant to section five thousand two hundred forty-one of the civil practice law and rules, a “default” shall be deemed to include amounts arising from retroactive support. The court may, and if a party shall fail or refuse to pay maintenance, distributive award or child support the court shall, upon notice and an opportunity to the defaulting party to be heard, require the party to furnish a surety, or the sequestering and sale of assets for the purpose of enforcing any award for maintenance, distributive award or child support and for the payment of reasonable and necessary attorney’s fees and disbursements.

b. (1) Upon application by either party, the court may annul or modify any prior order or judgment made after trial as to maintenance, upon a showing of the payee’s inability to be self-supporting or upon a showing of a substantial change in circumstance, including financial hardship or upon actual full or partial retirement of the payor if the retirement results in a substantial change in financial circumstances. Where, after the effective date of this part, an agreement remains in force, no modification of an order or judgment incorporating the terms of said agreement shall be made as to maintenance without a showing of extreme hardship on either party, in which event the judgment or order as modified shall supersede the terms of the prior agreement and judgment for such period of time and under such circumstances as the court determines. The court shall not reduce or annul any arrears of maintenance which have been reduced to final judgment pursuant to section two hundred forty-four of this article. No other arrears of maintenance which have accrued prior to the making of such application shall be subject to modification or annulment unless the defaulting party shows good cause for failure to make application for relief from the judgment or order directing such payment prior to the accrual of such arrears and the facts and circumstances constituting good cause are set forth in a written memorandum of decision. Such modification may increase maintenance nunc pro tunc as of the date of application based on newly discovered evidence. Any retroactive amount of maintenance due shall, except as provided for herein, be paid in one sum or periodic sums, as the court directs, taking into account any temporary or partial payments which have been made. The provisions of this subdivision shall not apply to a separation agreement made prior to the effective date of this part.

(2)(i) The court may modify an order of child support, including an order incorporating without merging an agreement or stipulation of the parties, upon a showing of a substantial change in circumstances. Incarceration shall not be considered voluntary unemployment and shall not be a bar to finding a substantial change in circumstances provided such incarceration is not the result of non-payment of a child support order, or an offense against the custodial parent or child who is the subject of the order or judgment.

(ii) In addition, unless the parties have specifically opted out of the following provisions in a validly executed agreement or stipulation entered into between the parties, the court may modify an order of child support where:

(A) three years have passed since the order was entered, last modified or adjusted; or

(B) there has been a change in either party’s gross income by fifteen percent or more since the order was entered, last modified, or adjusted. A reduction in income shall not be considered as a ground for modification unless it was involuntary and the party has made diligent attempts to secure employment commensurate with his or her education, ability, and experience.

(iii) No modification or annulment shall reduce or annul any arrears of child support which have accrued prior to the date of application to annul or modify any prior order or judgment as to child support. Such modification may increase child support nunc pro tunc as of the date of application based on newly discovered evidence. Any retroactive amount of child support due shall, except as provided for in this subparagraph, be paid in one sum or periodic sums, as the court directs, taking into account any temporary or partial payments which have been made. Any retroactive amount of child support due shall be support arrears/past due support. In addition, such retroactive child support shall be enforceable in any manner provided by law including, but not limited to, an execution for support enforcement pursuant to subdivision (b) of section fifty-two hundred forty-one of the civil practice law and rules. When a child receiving support is a public assistance recipient, or the order of support is being enforced or is to be enforced pursuant to section one hundred eleven-g of the social services law, the court shall establish the amount of retroactive child support and notify the parties that such amount shall be enforced by the support collection unit pursuant to an immediate execution for support enforcement as provided for by this chapter, or in such periodic payments as would have been authorized had such an execution been issued. In such case, the court shall not direct the schedule of repayment of retroactive support.

c. Notwithstanding any other provision of law, any written application or motion to the court for the modification or enforcement of a child support or combined maintenance and child support order for persons not in receipt of family assistance must contain either a request for child support enforcement services which would authorize the collection of the support obligation by the immediate issuance of an income execution for support enforcement as provided for by this chapter, completed in the manner specified in section one hundred eleven-g of the social services law; or a statement that the applicant has applied for or is in receipt of such services; or a statement that the applicant knows of the availability of such services, has declined them at this time and where support enforcement services pursuant to section one hundred eleven-g of the social services law have been declined that the applicant understands that an income deduction order may be issued pursuant to subdivision (c) of section five thousand two hundred forty-two of the civil practice law and rules without other child support enforcement services and that payment of an administrative fee may be required. The court shall provide a copy of any such request for child support enforcement services to the support collection unit of the appropriate social services district any time it directs payments to be made to such support collection unit. Additionally, the copy of such request shall be accompanied by the name, address and social security number of the parties; the date and place of the parties’ marriage; the name and date of birth of the child or children; and the name and address of the employers and income payors of the party ordered to pay child support to the other party. Unless the party receiving child support or combined maintenance and child support has applied for or is receiving such services, the court shall not direct such payments to be made to the support collection unit, as established in section one hundred eleven-h of the social services law.

d. The court shall direct that a copy of any child support or combined child and spousal support order issued by the court on or after the first day of October, nineteen hundred ninety-eight, in any proceeding under this section be provided promptly to the state case registry established pursuant to subdivision four-a of section one hundred eleven-b of the social services law.

Credits

(Added L.1962, c. 313, § 10. Amended L.1963, c. 685, § 6; L.1968, c. 699, § 1; L.1980, c. 281, § 9; L.1980, c. 645, §§ 2, 3; L.1981, c. 695, §§ 1, 2; L.1984, c. 790, § 2; L.1985, c. 809, § 6; L.1986, c. 884, §§ 1 to 4; L.1986, c. 892, §§ 2 to 4; L.1987, c. 815, §§ 6, 7; L.1989, c. 567, §§ 4, 5; L.1990, c. 818, §§ 4, 5; L.1992, c. 41, §§ 139, 140; L.1992, c. 415, §§ 1, 2; L.1993, c. 59, § 9; L.1993, c. 354, § 2; L.1994, c. 170, §§ 359, 360; L.1997, c. 398, §§ 4, 5, eff. Oct. 1, 1998; L.1997, c. 398, § 141, eff. Jan. 1, 1998; L.1997, c. 436, pt. B, §§ 105, 106, eff. Aug. 20, 1997; L.1998, c. 214, § 56, eff. Nov. 4, 1998; L.1998, c. 393, § 2, eff. July 22, 1998; L.1999, c. 275, § 2, eff. Sept. 18, 1999; L.2003, c. 595, § 1, eff. Sept. 22, 2003; L.2009, c. 72, § 1, eff. Sept. 1, 2009; L.2009, c. 229, §§ 1 to 3, eff. Sept. 14, 2009; L.2010, c. 32, § 1, eff. March 30, 2010, deemed eff. Sept. 1, 2009; L.2010, c. 182, §§ 7, 9, eff. Oct. 13, 2010; L.2010, c. 371, §§ 1, 2, 4, eff. Oct. 12, 2010; L.2010, c. 371, § 3, eff. Aug. 13, 2010; L.2015, c. 269, § 3, eff. Oct. 25, 2015; L.2015, c. 269, §§ 1, 2, 4, 5, eff. Jan. 23, 2016; L.2019, c. 313, § 4, eff. Sept. 13, 2019; L.2019, c. 335, §§ 4, 5, eff. Oct. 3, 2019; L.2019, c. 523, §§ 2, 3, eff. Nov. 20, 2019; L.2020, c. 55, pt. PP, § 1, eff. May 3, 2020; L.2021, c. 509, § 1, eff. Oct. 25, 2021.)
 
Editors’ Notes
SUPPLEMENTARY PRACTICE COMMENTARIES

by Alan D. Scheinkman
 
2017

C236B:3: Actions Subject to the Equitable Distribution Law

C236B:7: Marital Property--Pension and Retirement Benefits

C236B:8: Separate Property--Generally

C236B:15: Spousal Maintenance and Lump Sum Settlements

C236B:24: Marital Property to be Distributed “Equitably”

C236B:27: Equitable Distribution and Marital and Economic Fault
 
C236B:3: Actions Subject to the Equitable Distribution Law

Where a California judgment of divorce had granted the wife a specific amount of support but a California court subsequently terminated all support, the New York courts could not thereafter grant the wife maintenance following a foreign judgment because of res judicata and could not modify the California decrees because there was no longer a viable support provision to modify. Gonos v. Hadzipetros, 138 A.D.3d 99, 131 N.Y.S.3d 93 (2d Dept 2016).
 
C236B:7: Marital Property--Pension and Retirement Benefits

Federal law permits states to treat as marital or community property, and divide at divorce, a military veteran’s retirement pay. See 10 U.S.C. § 1408(c)(1). However, with respect to disability benefits, a disabled veteran is required to waive certain amounts, which the government then deducts, in order for the veteran to receive disability benefits. 10 U.S.C. § 1408(a)(4)(B).

In Mansell v. Mansell, 490 U.S. 581, 594-595, 109 S.Ct. 2023, 104 L.Ed.2d 675 (1989), the United States Supreme Court held that a state cannot treat as community property, and divide at divorce, the waived portion of the veteran’s retirement pay. Some states responded to this situation by directing that the amount that the former spouse receives each month from the retirement pay be increased in order to indemnify the former spouse for the loss caused by the veteran’s waiver. In Howell v. Howell, ___ U.S. ____, 137 S.Ct. 1400, 197 L.Ed.2d 781 (2017). the United States Supreme Court ruled that states are not permitted to do this. The Court noted that the principal reason for such provisions was to restore to the former spouse the amount that was lost to a postdivorce waiver, with the amount of indemnification mirroring the waived retirement pay, dollar for dollar. But, ruled the Court, such reimbursement and indemnification orders displace the federal rule and stand as an obstacle to the accomplishment and execution of the purposes and objectives of Congress. As a result, such orders are thus pre-empted.
 
C236B:8: Separate Property--Generally

The case of Cohen v. Cohen, 146 A.D.3d 1040, 45 N.Y.S.3d 628 (3d Dep’t 2017) presented interesting issues of both procedure and substance. The parties had acquired their home prior to marriage as joint tenants with rights of survivorship. The Appellate Division affirmed the trial court’s sua sponte determination to convert the parties’ claims for equitable distribution into an action for partition of the realty. The courts awarded title to the property to the wife after determining that the husband’s share in the equity was exceeded by the credit due the wife for payments made on the mortgage and to maintain the property. Of moment, the parties had refinanced the property and used some of the proceeds to pay some of the wife’ debts. The courts ruled that the refinancing proceeds were not marital funds inasmuch as the refinancing took place prior to the marriage and, in any case, the husband had suggested to the wife that they refinance the loan to pay off her debts and he ultimately consented to it. Under these circumstances, it was held permissible for the trial court to subtract the amount of the principal balance due on the loan after it had been refinanced from the stipulated amount of the fair market value of the marital residence in calculating the equity amount.
 
C236B:15: Spousal Maintenance and Lump Sum Settlements

As noted in the main volume, the maintenance terms of a marital agreement must be “fair and reasonable at the time of the making of the agreement” and not “unconscionable at the time of entry of final judgment”. In Maddaloni v. Maddaloni, 142 A.D.3d 646, 36 N.Y.S.3d 695 (2d Dep’t 2016), the court held unconscionable the maintenance provision of the 1988 postnuptial agreement, which provided the wife with only $50,000 in full satisfaction of all claims. When the parties made the agreement, about eight months after the marriage, the husband owned a jewelry business worth at least $3 million and was in contract to buy a shopping center. Thereafter, during more than 25 years of marriage, the jewelry business underwent tremendous growth while the wife worked there, and the parties lived what can easily be described as a lavish lifestyle. They owned numerous high-end automobiles and took numerous international vacations. For a time, they traveled regularly to the Bahamas on the husband’s yacht. Hence, the court concluded that, under these circumstances, enforcement of the maintenance provision would be unconscionable.
 
C236B:24: Marital Property to be Distributed “Equitably”

An unequal distribution of marital property may be directed in cases involving economic fault. In Kaprov v. Stalinsky, 145 A.D.3d 869, 44 N.Y.S.3d 123 (2d Dep’t 2016), the wife, after a 12year marriage, was awarded 70% of the marital assets due to the husband’s wasteful dissipation of at least $285,000 by his abandonment of several businesses.
 
C236B:27: Equitable Distribution and Marital and Economic Fault

In Kaprov v. Stalinsky, 145 A.D.3d 869, 44 N.Y.S.3d 123 (2d Dep’t 2016), the wife, after a 12 year marriage, was 70% of the marital assets due to the husband’s wasteful dissipation of at least $285,000 by his abandonment of several businesses.
 
2016

C236B:12: Opting Out Agreements--The Formalities

C236B:40: Temporary Maintenance
 
C236B:12: Opting Out Agreements--The Formalities

In Anonymous v. Anonymous, 137 A.D.3d 583, 27 N.Y.S.3d 541 (1st Dept. 2016), the Appellate Division, First Department, held that a trust agreement made between a husband and wife was invalid and unenforceable in their matrimonial action because the parties’ signatures on the agreement were not properly notarized. However, the court also ruled that whether the deed to an apartment which was the subject of the trust agreement should be reformed to reflect the identity of the true owner could not be decided upon summary judgment but required a trial.

In Anonymous, the parties executed a trust agreement that designated the parties, individually and collectively, as trustor of a trust that purchased the apartment. Since the agreement was not properly acknowledged, it was unenforceable and could not be considered even as evidence. But the court found questions of fact as to whether the parties intended to jointly own the apartment, and whether the husband was involved in any fraud in the preparation and execution of the trust agreement. Although the wife funded the purchase of the apartment and ordinarily would be considered the settlor, the husband alleged that the parties had agreed that the apartment would be joint property, and that consistent with that intention, he made certain payments towards maintenance and renovations. While the parties also had a prenuptial agreement, that agreement was not dispositive of the issue, as it did not list the apartment as the wife’s separate property. In addition, it merely defined joint property as that “titled in the joint names of the parties,” and the apartment is titled in the name of the invalidated trust. Reformation, said the court, is an equitable remedy and the parties’ intent, as well as any questions of unclean hands, are relevant to the determination. These issues had to be explored at a hearing.
 
C236B:40: Temporary Maintenance

The 2014 Supplementary Practice Commentaries on this topic took note of two cases out of the Appellate Division, First Department, which embodied the view that a general waiver of maintenance would not result in a waiver of temporary maintenance, i.e., to effectively waive temporary maintenance, that term need be explicitly referenced. See Lennox v. Weberman, 109 A.D.3d 703, 974 N.Y.S.2d 3 (1st Dept. 2013); Tregellas v. Tregellas, 169 A.D.2d 533, 564 N.Y.S.2d 406 (1st Dept. 1991). The First Department itself now disclaims such a view. Ruling in Anonymous v. Anonymous, 137 A.D.3d 583, 27 N.Y.S.3d 541 (1st Dept. 2016), a 4-1 majority of the First Department, held that where the parties’ agreement used broad and expansive language disclaiming the right of a party to seek spousal support of any kind, the language is effective to preclude temporary maintenance, even though the term “temporary maintenance” was not specifically mentioned in the agreement.

In the case before the court, the parties acknowledged and represented that they are “fully capable of being self supporting” and then, with that predicate, agreed to “waive any and all claims for spousal support and/or maintenance” “both now and in the future.” The Appellate Division majority ruled that, by using the words “any and all,” the parties, in this particular agreement, clearly signaled their intention that the waiver would encompass both temporary and final awards of spousal support. And the words “in the future” could, said the majority, only mean any time after the agreement was executed, which necessarily includes when the motion for temporary support was made. The court also noted that the maintenance waiver appeared below a heading--“MAINTENANCE/SPOUSAL SUPPORT UPON TERMINATION OF MARRIAGE.” The agreement defined termination of the marriage as having occurred upon commencement or institution of any matrimonial action to dissolve or annul the marriage by either party. Hence, ruled the majority, the parties tied the maintenance waiver to the “termination of the marriage,” as defined in the agreement and thus, intended the waiver to cover any maintenance request made after the commencement of a divorce action, including a request for temporary maintenance. The majority held that the failure to specifically mention temporary maintenance did not defeat the intent and purpose of the broad waiver reflected in the agreement.

In Anonymous, the majority found the court’s prior precedents to be distinguishable. For one, in the prenuptial agreement in Lennox v. Weberman, 109 A.D.3d 703, 704, 974 N.Y.S.2d 3 (1st Dept. 2013), the defendant waived any claim to a final award of maintenance, and there was no express agreement to exclude an award of temporary maintenance. Thus, the Anonymous was suggesting that the inclusion of the word “final” before award of maintenance limited the waiver to just that situation. In Anonymous, the parties did not limit the waiver to final maintenance, but rather waived “any and all” maintenance “now and in the future.” As for Tregellas v. Tregellas, 169 A.D.2d 553, 553, 564 N.Y.S.2d 406 (1st Dept. 1991), the Anonymous court described it as merely concluding that the particular prenuptial agreement in that case did not bar an award of temporary support, without any indication that the parties in Tregellas used the expansive language employed in the agreement in Anonymous or tied the waiver of maintenance to all support requests made after commencement of a matrimonial action.

A dissenting justice took the view that any waiver of support, including a waiver of temporary maintenance, must be clear. This standard, as articulated in Lennox, mandates that a purported waiver of temporary maintenance be “express” in order to effectively deprive the court of its inherent discretion to award such relief. According to the dissent, in view of the unique purposes of temporary maintenance, this is an appropriate and rational requirement. And the dissent viewed the Anonymous agreement has lacking the necessity clarity in that the provision in which the parties agreed to waive “maintenance” did not contain an express waiver of temporary maintenance.
 
2015

C236B:6: Marital Property--Professional Licenses and Degrees

C236B:6A: Marital Property--Avoiding Overlap Between Practice and License Awards

C236B:15: Spousal Maintenance and Lump Sum Settlements

C236B:35: Post-Divorce Maintenance--General Concepts

C236B:36: Post-Divorce Maintenance--The Legislative Factors

C236B:37: Temporary Maintenance

C236B:45: Modification
 
C236B:6: Marital Property--Professional Licenses and Degrees

The Legislature has overturned O’Brien and its progeny. For some thirty years, ever since the leading case of O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 746, 489 N.E.2d 712 (1985), licenses to practice a profession and educational degrees, to the extent acquired during the marriage and proven to have economic value, have been regarded as marital property subject to equitable distribution. Now, pursuant to 2015 legislation, the courts are barred from considering as marital property “the value of a spouse’s enhanced earning capacity arising from a license, degree, celebrity goodwill, or career enhancement”. This proscription is not found in the definition of marital property but in Factor 7 of the equitable distribution factors set forth in paragraph d of subdivision 5 of Part B of Section 236. This somewhat odd placement may be explained by the legislative decision that, while licenses and degrees are no longer to be considered marital property subject to distribution, the court is still to consider direct or indirect contributions by the non-titled to the development during the marriage of the enhanced earning capacity of the other spouse for purposes of distribution of the distributable marital property. The statute does not provide explicit guidance as to whether evidence as to the value of the enhanced earning capacity may be received and considered.

Under the O’Brien doctrine, evidence of value was indispensable to showing that there was, in fact, an enhanced earning capacity attributable to a license or degree obtained during marriage. It may be argued that whether enhanced earnings exists at all, and therefore may be considered as relevant to the non-titled spouse’s contributions and efforts, requires proof of value. Perhaps titled spouses will contend that absence of value evidence means that there is no enhanced earnings and, therefore, the non-titled spouse may not have his or her efforts in this regard considered as an equitable distribution factor. On the other hand, titled spouses may resist efforts to obtain appraisers, and appraiser fee awards, on the ground that valuation is no longer required since licenses and degrees are no longer marital assets. While this has been stated in terms of arguments that may be forthcoming from titled spouses, of course, non-titled spouses may be expected to present the polar opposite positions.

This legislative change takes effect January 23, 2016 and applies to matrimonial actions commenced on or after that date. Hence, matrimonial actions commenced prior to that date will continue to be subject to the O’Brien principles.
 
C236B:6A: Marital Property--Avoiding Overlap Between Practice and License Awards

As discussed above under Supplementary Practice Commentary C236B:6, the O’Brien doctrine has been legislatively repealed as to matrimonial actions commenced on or after January 25, 2016. Hence, as to such cases, since licenses and degrees are no longer to be considered distributable marital property, there is no longer any need to be considered with avoiding duplication with an award for both a license (or degree) and maintenance. That said, there is still the potential for duplication between an award for the value of a professional practice and an award of maintenance. However, if the court applies the new statutory maintenance formula, that formula does not change based on marital property distributed. But the court could potentially consider the marital distribution, including a practice value distribution, in deciding whether to consider, for maintenance purposes, income over the statutory income cap, or in considering whether to adjust the guideline support as being unjust or inappropriate.
 
C236B:15: Spousal Maintenance and Lump Sum Settlements

As is discussed in these 2015 Supplementary Practice Commentaries, in 2015, the Legislature enacted a new guidelines-based approach to the calculation of post-divorce maintenance. It also revamped the guidelines-based approach to temporary maintenance enacted in 2010.

As enacted in 2010, the temporary maintenance statute contained a provision that a validly executed agreement or stipulation was required to include a provision stating that the parties had been advised of the statutory provisions regarding temporary maintenance and the presumptive nature of the guidelines. This provision has been repealed. Rather, the new statute simply provides that nothing in it should be construed as altering the rights of the parties to voluntarily enter into agreements or stipulations which deviate from the presumptive award of temporary maintenance. Likewise, the new provisions concerning post-divorce maintenance provide that nothing in them should be construed as altering the rights of the parties to enter into agreements or stipulations which deviate from the post-divorce maintenance guidelines. Thus, the statute does not require that agreements or stipulations specify that the parties have been advised, or are aware of, the temporary and post-divorce maintenance guidelines. However, the statute does not bar making such specification and, perhaps, doing so would be advisable so as avoid or mitigate a later challenge to the validity of an agreement. These statutory changes as to temporary maintenance are effective with respect to actions or proceedings commenced on or after October 25, 2015, while the provisions with respect to post-divorce maintenance are effective as to actions and proceedings commenced on or after January 23, 2016.
 
C236B:35: Post-Divorce Maintenance--General Concepts

In 2015, the Legislature enacted a sweeping change to the methodology by which maintenance is to be determined. Replacing the system of having maintenance decided by judges using their discretion as guided by consideration of a variety of legislative and judicially-created factors, post-divorce maintenance is to be determined, in many, instances by the application of a guideline formula. The Legislature has also developed a formula for consideration in the determination as to the duration of maintenance. These changes are effective with respect to matrimonial actions and family court proceedings commenced on or after January 23, 2016.

The 2015 legislation (L. 2015, ch. 269) essentially repeals existing subdivision 6 of Part B of Section 236 and replaces it with a new version. The statute establishes two formulas for determining the amount of post-divorce maintenance: one applies where the maintenance payor is also the payor of child support; the other applies whether the maintenance payor is not paying child support, either because there are no children or because the maintenance payor is the custodial parent of the children. The terms “payor” and “payee” are defined legislatively in relation to income; the payor is the spouse with the higher income and the payee is the spouse with the lower income. And, logically, it is the spouse with the higher income would be a candidate to pay maintenance, while the spouse with the lower income would be a candidate to receive maintenance.

Where the maintenance payor is also paying child support, maintenance is determined by: (a) subtracting 25% of the payee’s income from 20% of the payor’s income; (b) multiplying the sum of the payor’s income and the payee’s income by 40% and then subtracting the payee’s income from the result obtained by multiplication. The lower of the two thus calculated figures is the guidelines maintenance amount.

For example, assume that plaintiff is the maintenance payee and is paying child support, the plaintiff’s income is $100,000 per year and the defendant’s income is $40,000 per year. Under the first calculation, 25% of the payee’s income is $10,000, 20% of the payor’s income is $20,000, and subtracting $10,000 from $20,000 would put the result of the first calculation at $10,000. Under the second calculation, 40% of the combined income is $56,000 (40% of 140,000) and subtracting that by the payee’s income of $40,000, leaves $16,000, which then is the result of the second calculation. Since the lower of the two calculations in this illustration is the first calculation, it is that one which would be used, placing the amount of maintenance at $10,000 per year.

Where the maintenance payee is not paying child support, maintenance is determined by: (a) subtracting 20% of the maintenance payee’s income from 30% of the maintenance payor’s income; (b) multiplying the sum of the payor’s income and the payee’s income by 40% and then subtracting the payee’s income from the result obtained by multiplication. The lower of the two thus calculated figures is the guidelines maintenance amount.

Assume again, plaintiff is the maintenance payee but is not paying child support, the plaintiff’s income is $100,000 per year and the defendant’s income is $40,000 per year. Under the first calculation, 20% of the payee’s income is $8,000, 30% of the payor’s income is $30,000, and subtracting $8,000 from $30,000 would put the result of the first calculation at $22,000. Under the second calculation, 40% of the combined income is $56,000 (40% of $140,000) and subtracting that by the payee’s income of $40,000, leaves $16,000, which then is the result of the second calculation. Since the lower of the two calculations in this illustration is the second calculation, it is that one which would be used, placing the amount of maintenance at $16,000 per year.

In the event that the calculations result in an amount that is zero or a negative number, then the amount of maintenance would be zero. For example, assume that there are no children, that the plaintiff’s income is $40,000 per year and the defendant’s income is $35,000 per year. Under the first calculation, 20% of the payee’s income is $7,000, 30% of the payor’s income is $12,000, and subtracting $7,000 from $12,000 would leave $5,000. Under the second calculation, 40% of the combined income is $30,000 (40% of $75,000) and subtracting that by the payee’s income of $35,000 would yield a negative ($-5,000). Since the lower of the two calculations results in a negative, no maintenance would be paid.

There is also a rebuttable presumption that no maintenance is payable in the event that the payor’s income is below the self-support reserve. And if the guidelines payment would put the payor’s income below the self-support reserve, maintenance would be set at the difference between the payor’s income and the self-support reserve.

Where both maintenance and child support are to be calculated, maintenance is to be calculated first since the amount of maintenance is to be subtracted from the payor’s income and added to the payee’s income for child support purposes.

The statute provides for what income is to be used in performing these calculations. The starting point is the income used for child support purposes, but without subtraction for alimony or maintenance paid, or to be paid, to the other party to the action. Thus, while maintenance is to deducted from income for child support standards purposes, it is not deducted for determining what the maintenance should be. Moreover, it is apparent that child support payable for the benefit of the children who are the subject of the action. Again, for child support calculations purposes, maintenance payable to a prior spouse and child support payable to prior child would be deductions from income. Income as would be calculated for child support purposes is the starting point for maintenance purposes as well even if there are no children.

Income from income-producing property which is distributed or to be distributed in equitable distribution is to be considered income for maintenance purposes. This aspect of the statute may prove problematic. The child support standards conception of income includes income from income-producing property. Thus, the specific reference to adding this form of income to income for maintenance purposes could seem to be redundant. On the other hand, it may be that the intent was to authorize the court to shift the income from the titled spouse to the non-titled spouse in the event the property is distributed to the non-titled spouse. Likewise, if the income-producing property is jointly owned and it is distributed to one of the spouses, income-shifting may be authorized in that circumstance as well.

Where the payor’s income is equal to or less than $175,000 per year, the statutory guidelines are to be followed, unless the court finds that the guidelines amount is unjust or or inappropriate. The $175,000 per year figure is to be adjusted every two years, starting January 31, 2016, by an increase for the average annual percentage change in the Consumer Price Index for All Urban Consumers as published by the United States Department of Labor. This adjustment is done by the Office of Court Administration.

Where the payor’s income exceeds the income cap, the court is to perform the required calculations based on the payor’s income up to the cap and then decide whether to award additional maintenance.

The court is also given the authority to consider an advisory schedule in deciding the duration of maintenance. The schedule suggests that maintenance be payable for a percentage of the time that the parties were married, that is, the schedule ties the length of maintenance payments to the length of the marriage The schedule may be considered whether the payor’s income is under or over the income cap. However, the schedule is advisory only; there is no presumption that the schedule should be used and, in any event, the schedule is not precise. The schedule is as follows:

Length of Marriage
 
	Percentage of Length of Marriage That For Which Maintenance Payable

0 to 15 years
 
	15% to 30%

15 years to 20 years
 
	30% to 40

More than 20 years
 
	35% to 50%

Length of marriage is defined as the time between the date of the marriage and the date of the commencement of the matrimonial action.

To illustrate, if the parties were married for 10 years, the guideline would advise that maintenance be payable for 1.5 to 3 years duration.

Under the advisory schedule, the presence of children of the marriage makes no difference. However, the court may, in deciding the duration of maintenance, disregard the schedule entirely or give it consideration, but whatever it does the court may consider a number of factors, including whether a spouse’s care of children inhibited her or his earning capacity. But, in addition, the court is mandated to consider anticipated retirement assets, benefits, and retirement eligibility age of the parties, if ascertainable, in deciding the duration of maintenance payments. Indeed, the actual full or partial retirement of the payor with substantial diminution of income is a basis for modification, provided that this was not ascertainable at the time of the original maintenance decision.

That the court specifies a period of time during which maintenance is to be paid does not operate to extend the duration of payments beyond the deaths of the parties or the remarriage of the payee. Nor is the court precluded from modifying the period later on.

In deciding whether to deviate from the formula in cases where the payor’s income is under the cap and in deciding whether to award additional maintenance (on top of what the income-capped formula yields) where the payor’s income exceeds the cap, the court may consider some or all of 14 specifically enumerated factors. Many of these 14 factors are the same or similar to factors which were considered under prior law. Like prior law, the court may consider any other factor it considers just and proper. It may be that the factors that were judicially crafted under prior law will also carry over into the new approach. The 14 specifically listed factors are:

(1) the age and health of the parties;

(2) the present or future earning capacity of the parties, including a history of limited participation in the workforce;

(3) the need of one party to incur education or training expenses;

(4) termination of a child support award before the termination of the maintenance award where the maintenance calculation was upon child support being awarded which resulted in a maintenance award lower than it would have been had child support not been awarded;

(5) the wasteful dissipation of marital property, including transfers or encumbrances made in contemplation of a matrimonial action without fair consideration;

(6) the existence and duration of a pre-marital joint household or a pre-divorce separate household;

(7) acts by one party against another that have inhibited or continue to inhibit a party’s earning capacity or ability to obtain meaningful employment, including acts of domestic violence;

(8) the availability and cost of medical insurance for the parties;

(9) the care of children or stepchildren, disabled adult children or stepchildren, elderly parents or in-laws provided during the marriage that inhibits a party’s earning capacity;

(10) the tax consequences to each party;

(11) the standard of living of the parties established during the marriage;

(12) the reduced or lost earning capacity of the payee as a result of having forgone or delayed education, training, employment or career opportunities during the marriage;

(13) the equitable distribution of marital property and the income or imputed income on the assets so distributed; and

(14) the contributions and services of the payee as a spouse, parent, wage earner and homemaker and to the career or career potential of the other party.

The court’s decision as to maintenance and its duration must be either in writing or set forth on the record. The decision must identify the factors considered by the court. As with prior law, the necessity for a decision may not be waived by counsel.

Where a party has defaulted or the court finds that it has insufficient information to determine income, the court is to decide post-divorce maintenance on the basis of the needs of the payee or the standard of living of the parties prior to the commencement of the divorce action, whichever is greater. This determination may be retroactively modified upward, without having a showing of change in circumstances, if there is a showing of newly discovered evidence.

Where either or both of the parties is unrepresented, the court may not enter a maintenance order or judgment unless it informs the unrepresented party or parties of the post-divorce maintenance obligation.
 
C236B:36: Post-Divorce Maintenance--The Legislative Factors

As is discussed in these 2015 Supplementary Practice Commentaries, in 2015, the Legislature enacted a new guidelines-based approach to the calculation of post-divorce maintenance. As part of that revision, the legislative factors, and their use, has change with respect to matrimonial actions commenced on or after after January 23, 2016. Accordingly, this year’s Supplementary Practice Commentary C236B:35 should be consulted.
 
C236B:37: Temporary Maintenance

In 2015, the Legislature enacted a new guidelines-based approach to the calculation of post-divorce maintenance. As part of the new statute, the 2010 provisions regarding temporary maintenance have also undergone significant revision. However, unlike the provisions regarding post-divorce maintenance which take effect with respect to actions commenced on or after January 23, 2016, the temporary maintenance changes come into effect sooner, as to actions commenced on or after October 25, 2015. This means that the temporary maintenance revisions will apply to cases commenced between October 25, 2015 and January 22, 2016 but the post-divorce maintenance changes will not apply.

The existing temporary maintenance formula is replaced by two formulas: one applies where child support will also be paid by the maintenance payor and one applies where the maintenance payor is not also paying child support. These formulas are the same for temporary maintenance purposes. In addition, the current income cap for temporary maintenance of $543,000 is lowered to $175,000 of the payor’s income, which is the same income cap for post-divorce maintenance purposes.

The temporary maintenance provisions have been revised to clarify that, while the court may set the duration for a temporary maintenance award, that duration can be no longer than the issuance of a judgment or divorce or death of a party, whichever occurs first.

The court is required to use the temporary maintenance formula where the income of the payor is at or below the income cap. Where the income exceeds the income cap, the court award additional maintenance based on consideration of any, some, or all of the same factors that apply to post-divorce maintenance deviation.

The court’s temporary maintenance decision must either be in writing or placed on the record.
 
C236B:45: Modification

The 2015 maintenance statute specifies that the changes made by the Legislature do not give rise to a change of circumstances warranting modification of pre-existing maintenance orders or agreements.
 
2014

C236B:4: Marital Property--Generally

C236B:12: Opting Out Agreements-The Formalities

C236B:40: Temporary Maintenance
 
C236B:4: Marital Property--Generally

Pursuant to the Equitable Distribution Law, the commencement of a matrimonial action serves to cut-off the acquisition of marital property from that date forward. As discussed in the main volume at pages 88-89, the commencement of a later, successful matrimonial action will trump, for termination of marital property purposes, the commencement date of an earlier unsuccessful action.

An interesting twist on this principle, in the context of the arrival of no-fault divorce, is suggested by Rinzler v. Rinzler, 97 A.D.3d 215, 947 N.Y.S.2d 844 (3rd Dept. 2012). There, the husband commenced, before irretrievable breakdown became an available ground for divorce, an action for divorce predicated upon assertions of fault. After irretrievable breakdown became available, the husband commenced a second action, this time predicated upon the new divorce ground. The wife succeeded in obtaining dismissal from the Supreme Court on the basis that there was a prior action-the fault-based action-pending. The Appellate Division, Third Department, reversed, ruling that the two causes of action were not the same and that allowing the husband to proceed with the second is more likely to lessen the burden on both parties and promote judicial economy by obviating the necessity of a trial on the issue of fault action would not unduly burden defendant. In fact, said the appellate court, allowing the no-fault action to proceed would be likely to lessen the burden on both parties and promote judicial economy by obviating the necessity of a trial on the issue of fault. Rinzler did not speak to whether it was possible for the defendant in the no-fault divorce action to contest the claim of irretrievable breakdown.

But, for present purposes, there is a larger point about Rinzler. The Third Department held that allowing the husband to press the second action would not allow him to circumvent the statutory provisions concerning the controlling end date for the determination of marital property. However, the court did not speak to how the controlling date issues would be resolved. If the plaintiff decided not to pursue the first action, the defendant, who had counterclaimed therein, would presumably be entitled to try to establish her fault counterclaim. If she succeeded, the date of commencement of the first action would presumably control the cut-off date for the acquisition of marital property, since the first action would be successful and presumably the second action would be moot. Such a result would benefit a party who acquired property in the meantime or could benefit a party’s whose marital property increased in value in the period between the two actions. But it should also be considered that the first action would also be controlling on the effective date of maintenance and child support, which would benefit the party receiving such forms of relief. On the other hand, it is at least arguable that the trial court could decide to try the second action first, after all doing so would produce the lesser burden on the parties and the court remarked on by the Third Department. If, as would seem inevitable, the husband was successful in obtaining the no-fault divorce, it would be maintained the first action is moot. That result would mean a later marital property cut-off date and a later effective date for permanent maintenance and child support. Of course, the court could try both actions together and it may be inappropriate to deny the wife the opportunity to prove her fault-based counterclaim in the first action, especially if there were significant economic consequences hanging on the result.

It is well settled that the Equitable Distribution Law does not create any interests in marital property prior to the termination of the marriage. Stated somewhat differently, rights do not vest upon the commencement of a matrimonial action. These points were reiterated by a federal district court, not the typical source of pronouncement on New York family law. The case, Charles Schwab & Co., Inc. v. Makowska, 999 F.Supp.2d 459 (E.D.N.Y. 2014) was brought by a brokerage fund as an interpleader action seeking a judicial determination as to who was entitled to the proceeds of an account containing almost $570,000. One potential claimants to the fund was the husband, who owed significant tax liabilities, assessed on May 30, 2011. -Another claimant was the federal government who had served a levy on the brokerage account on June 10, 2011. The third claimant was the wife who had commenced a divorce action against the husband on October 14, 2010, which action went to judgment in September 2013. The federal district court held that the federal tax lien was superior to the claims of the husband and wife. The husband was the sole title owner of the account. Hence, the wife’s commencement of the matrimonial action did not convey any actual interest in the account to her and, by the time she received the divorce judgment in 2013, the federal government had already asserted a superior interest via its tax lien. The court concluded that, since a judgment dissolving the marriage and determining the wife’s rights in the account had not been entered prior to the time that the federal tax lien had attached to the property, the wife’s claim to an interest superior to that of the federal government failed as a matter of law.
 
C236B:12: Opting Out Agreements-The Formalities

In Rio v. Rio, 110 A.D.3d 1051, 974 N.Y.S.2d 491 (2d Dept. 2013), the courts upheld the validity of a post-nuptial agreement, notwithstanding that it apparently was not acknowledged. But the facts of the case are somewhat unusual and, in any event, the husband, who was bringing the challenge to the agreement, was also held to have ratified the agreement.

The parties had been married and, after about four years, entered into a separation agreement, which required the husband to pay the wife weekly maintenance for a two year period. Several years later, the wife commenced a divorce action. Through counsel, the parties negotiated a post-nuptial agreement under which the husband agreed to pay the wife $300,000. The post-nuptial agreement, which expressly revoked all prior agreements, was signed by the parties in the presence of witnesses, though the husband had discharged his counsel. Contemporaneously with the signing of the post-nuptial agreement, stipulations of discontinuance were signed with respect to the pending litigation. Roughly one year later, the husband brought another divorce action and, in that context, the parties and their counsel signed a preliminary conference stipulation that indicated that, with respect to maintenance being paid, the wife was being paid $1,000 per week to be credited toward $300,000 due under the post-nuptial agreement. The wife later moved for temporary maintenance, the husband argued that he had agreed to pay $1,000 per week and the court ordered him to continue paying $1,000 per week as per the preliminary conference stipulation. After all this, the husband moved to have the post-nuptial agreement invalidated and the original separation agreement validated. The Appellate Division, affirming the trial court, held that post-nuptial agreement was failed because it was executed as part of a pending divorce proceeding and was subject to judicial oversight, though not actually made in open court. The appellate court also ruled that the husband had ratified the post-nuptial agreement by relying upon it in the preliminary conference stipulation relating to his maintenance obligations in the present divorce case.
 
C236B:40: Temporary Maintenance

The materials in the main volume noted that, where a prenuptial agreement is in effect, any award of temporary maintenance must be in accordance with the terms of the agreement (see page 308). However, there is an important qualifier. While it is permissible for a prenuptial agreement to contain a provision waiving temporary maintenance, the agreement must do so explicitly or else temporary maintenance will not be waived. Language waiving maintenance, as distinguished from maintenance and temporary maintenance, will only result in a waiver of maintenance and not of temporary maintenance. Lennox v. Weberman, 109 A.D.3d 703, 974 N.Y.S.2d 3 (1st Dept. 2013); Tregellas v. Tregellas, 169 A.D.2d 533, 564 N.Y.S.2d 406 (1st Dept. 1991). In Lennox, the First Department upheld a very substantial temporary maintenance award--$38,000 in tax-free monthly maintenance together with payment of the wife’s unreimbursed medical expenses up to $2,000 per month. The First Department mitigated the impact of this award by directing that one-half of the interim awards be charged against the one-half share of the marital property that the wife was entitled to under the prenuptial agreement. In making this adjustment, the appellate court found it significant that the agreement provided that the parties waived any rights to the other’s separate property, that living expenses were to be paid out of marital property, and marital property was to be divided equally in the event of divorce. Moreover, the equal division of the marital property would leave each with substantial wealth.

The courts continue to grapple with the formula-based temporary maintenance approach that was legislatively mandated in 2010 (see discussion in the 2011 supplementary practice commentary).

In Davydova v. Sasonov, 109 A.D.3d 955, 972 N.Y.S.2d 293 (2d Dept. 2013), the Second Department held that the trial courts are obligated to follow the provisions of the statute when passing upon an application for temporary maintenance. Since in that case the trial court had failed to comply with the statute in awarding temporary maintenance, the Appellate Division remitted the matter to the Supreme Court for a recalculation of the temporary maintenance award. Notably, the appellate court could, if the record permitted, undertaken the calculations itself. However, generally, the appellate courts will correct errors in the calculations, not do the calculations from scratch.

On the other hand, the process followed by the trial court need not be entirely fool-proof. In Goncalves v. Goncalves, 108 A.D.3d 901, 963 N.Y.S.2d 686 (2d Dept. 2013), the Second Department stated that, while it is better for the court to follow the statutory procedure sequentially, if, in the end, the court’s determination is adequately support and explained, the award will not be disturbed. Notably, in that case, the award of temporary maintenance to the wife was significantly in excess of the amount that would been yielded solely by application of the statutory formula and, significantly, the trial court explained at length how, upon consideration of all of the relevant statutory factors, the higher award was appropriate.

In Dachille v. Dachille, 43 Misc.3d 241, 983 N.Y.S.2d 193 (Sup. Ct. Monroe County 2014), the court ruled that veteran’s disability benefits count as income for temporary maintenance calculation purposes. It is true that the portion of disposable retired pay of veterans which constitutes a portion of retirement benefits waived in order receive disability benefits is exempt from equitable distribution (see Mansell v. Mansell, 490 U.S. 581, 109 S.Ct. 2023, 104 L.Ed.2d 675 [1989]). But that has to do with whether a spouse can receive equitable distribution of such benefits, not with whether benefits received by a veteran count as income for support purposes. Of further interest, in that case, counting the husband’s veteran’s disability payments, the husband’s income was almost $65,000 per year, while the wife’s income (less FICA) was approximately $59,200 per year. The court held that it could deny the husband’s application for temporary maintenance without having perform any calculations since there was no significant difference between the parties’ incomes.

Note should be taken that as of January 31, 2014, the temporary maintenance cap was increased to $543,000.00, due to the bi-annual consumer price index-based adjustment required by the statute.
 
2012

C236B:26: Valuation Dates and Proof

C236B:36: Post-Divorce Maintenance--The Legislative Factors

C236B:37: Post-Divorce Maintenance and Marital Fault

C236B:40: Temporary Maintenance
 
C236B:26: Valuation Dates and Proof

Where the value of an asset drops after the judgment of divorce has been entered and the property distributed, the division of property will not be reconsidered, even if the value of the asset has diminished significantly, even to the point of nonexistence. See Simkin v. Blank, 19 N.Y.3d 46, 945 N.Y.S.2d 222, 968 N.E.2d 459 (2012). This point is made in the context of the dismissal of an action brought by a husband seeking to set aside settlement agreement. Under the agreement, he received a Madoff investment account which, as the result of a Ponzi scheme, turned out to be relatively worthless. According to the husband, the parties, in implementing a equal division of the marital assets, valued the Madoff account as being worth $5.4 million as of the valuation date. The husband alleged $2,700,000 of a $6,250,000 distributive payment to the wife represented her “share” of the Madoff account. He asserts that the parties’ intention to equally divide the marital estate was frustrated because both parties operated under the “mistake” or misconception as to the existence of a legitimate investment account with Madoff which, in fact, was revealed to be part of a fraudulent scheme. However, in an interesting twist, the husband had withdrawn some of the money from the Madoff account and used it to pay part of the wife’s distributive award.

The Court of Appeals rejected the husband’s mutual mistake argument, pointing out that, because the Ponzi scheme did not begin to unravel until more than two years after the property division was complete, it was possible for the husband to redeem all or part of the investment and, in fact, did so in order to pay part of the distributive payment to the wife. The Court held that the mutual mistake must have existed at the time the agreement was executed and, therefore, the fact that the husband could not withdraw the rest of the money years later was not determinative.

The Simkin Court drew an analogy to the situation where a marital asset that unexpectedly loses value after dissolution of a marriage; the asset had value at the time of the settlement but the purported value did not remain consistent. The Court stated if an asset retained by a party had substantially increased in worth after the divorce, the other spouse should not be able to claim a portion of the enhancement in value. Hence, the Court of Appeals viewed the case as analogous to the Appellate Division precedents denying a spouse’s attempt to reopen a settlement agreement based on post-divorce changes in asset valuation.
 
C236B:36: Post-Divorce Maintenance--The Legislative Factors

The Legislature has significantly reworked and enlarged the specifically enumerated factors for consideration in determining the amount and duration of post-divorce maintenance. N.Y. Dom. Rel. Law § 236, Part B(6)(a). While the list of statutory factors had grown to 11 enumerated factors and one non-enumerated factor, the revision ups the number of enumerated factors to 19, with Factor 20 being the “catch-all”, any other factor that the court finds proper. In addition, the marital standard of living, which had been one of the legislatively enumerated factors before 1986, retains its place at the head of the maintenance provision and, thus, given additional status as a consideration. Some of the factors were also renumbered and moved around.

Given the increased number of factors and the adjustment in the numbering scheme, it is appropriate to re-state and update the considerations set forth in the main volume materials on this subject.

Factor 1--The court must consider the income and property of the respective parties, including marital property which is being equitably distributed. Unlike equitable distribution Factor 1 (N.Y. Dom. Rel. Law § 236, Part B, subd. 5[d][1]), this factor does not contain express time limits. The data should be as current as possible and there seems to be no reason to exclude property or income increases which occurred between the commencement of the action and the time of trial from consideration.

In addition to income, the court should consider the extent of the separate property of each party and the extent of property acquired by either party after the commencement of the action. The court is expressly permitted to consider the marital property distributed to each party under Equitable Distribution. As with equitable distribution Factor 5, this is a cross-reference designed to assure that the court has the ability to fully integrate a complete financial resolution.

The implication of Factor 1 is that if each party has sufficient income and property to care for his or her own needs, maintenance should not be awarded. On the other hand, if a party has more income and more property than the other, an award of post-divorce maintenance may be appropriate.

The extent of equitable distribution is a maintenance factor. See Avramis v. Avramis, 245 A.D.2d 585, 664 N.Y.S.2d 885 (3d Dep’t 1997) (no maintenance where wife received substantial assets and, because she played an active role in the parties’ real estate holdings, had numerous business skills); Vainchenker v. Vainchenker, 242 A.D.2d 620, 662 N.Y.S.2d 545, 121 Ed. Law Rep. 288 (2d Dep’t 1997) (maintenance award set aside in view of equitable distribution award, wife’s relative ability to be self-supporting, and other financial considerations). In Love v. Love, 250 A.D.2d 739, 673 N.Y.S.2d 175 (2d Dep’t 1998), the court reduced the duration of the award of maintenance from 11 years to five years, holding that five years was sufficient for the 39-year old wife, who had post-high school job training, to obtain employment, bearing in mind that she received a substantial equitable distribution award. Likewise, in Granade-Bastuck v. Bastuck, 249 A.D.2d 444, 671 N.Y.S.2d 512 (2d Dep’t 1998), the appellate court reduced the amount of maintenance allowed by the trial court and limited the award to four years, where the wife had a separate estate worth $1,200,000, had liquid assets of nearly $1 million at the time of trial, and was granted equitable distribution as well. The wife was also relatively young, highly educated, only one course short of obtaining her teaching certificate, and the parties’ only child was about to enter kindergarten. On these facts, the appellate court concluded that a maintenance award of four years’ duration was sufficient to enable the wife to obtain her teaching credentials, obtain employment, and remain available to the child. See also Robinson v. Robinson, 256 A.D.2d 1011, 682 N.Y.S.2d 292 (3d Dep’t 1998) (no maintenance awarded where wife had ability to be self-supporting and sole ownership of the chief marital asset).

Factor 2--This factor (duration of marriage) is similar to equitable distribution Factor 2 and was also a consideration under prior law.

A 10-month marriage is clearly a short one. Daniels v. Daniels, 243 A.D.2d 254, 663 N.Y.S.2d 141 (1st Dept 1997). However, the fact that the marriage is a short one does not preclude an award of maintenance. In Daniels, the court granted the wife 20 months of maintenance, despite the brevity of the marriage, where the wife had retired from her career shortly before the marriage. See also Allen v. Allen, 275 A.D.2d 225, 712 N.Y.S.2d 496 (1st Dep’t 2000) (the parties had known each other for 35 years and had a grown son, and wife, at advanced age, left her job to be with wealthy husband, wife was entitled to maintenance even though marriage lasted only four years; court awarded wife, at age 59, $5,000 per month maintenance for five years and $3,500 per month for the balance of her life).

Factor 3--The age and health of the parties were formerly a consideration as part of old Factor 2 and have now been broken out as a separate factor from the duration of the marriage. Clearly, the older a spouse is and the worse his or health is will impact on a spouse’s need for support as well as upon a spouse’s ability to pay support.

Factor 4--Factor 4 provides for consideration of the present and future earning capacities of both parties. Prior to 2010, this was Factor 3. The amount each party is capable of earning presently as the result of honest effort is highly relevant to the issue of maintenance. The amount that a party can earn is closely related to that party’s ability to be self-supporting, bearing in mind the marital standard of living. Whether a party has the ability to continue to earn what he or she presently earns or whether the earnings will increase or diminish in the future also bears on the same question.

A spouse who unjustifiably failed or refused to work during the marriage may not be rewarded by an award of maintenance following divorce. Thus, where the husband did not work through much of the marriage, did not perform household duties, made only minor economic or noneconomic contributions to the marriage, but possessed many skills and a strong educational background, it was held error to require the wife to pay him an award of maintenance. Sade v. Sade, 251 A.D.2d 646, 675 N.Y.S.2d 119 (2d Dep’t 1998).

Factor 5--This factor requires the court to consider whether a party needs to incur education or training expenses. If a spouse needs to obtain education or training in order to obtain or enhance earning capacity, the costs of the needed education or training should be considered in determining whether that spouse should be awarded maintenance and, if so, in what amount. The court is required to consider whether the education and training expenses are needed. The support-seeking spouse should endeavor to offer evidence as to the necessity of education or training expenses and the reasonableness of the expenses.

Factor 6--A factor added in 2010 is whether there was a pre-marital joint household and, if so, for how long and whether there has been, and for how long, a pre-divorce separate household. To a certain extent, consideration of the duration of a pre-marital joint household would seem to be duplicative of Factor 2’s requirement that the length of the marriage. However, there are situations where the parties may have lived together prior to marriage. Conversely, there are situations where the spouses separate prior to the commencement of, or during, the divorce litigation. Where the parties have resided separately for some time, the circumstances (and standard) of the separate households may be relevant on the necessity and amount of post-divorce maintenance.

Factor 7--Another new factor as of 2010 is whether one party engaged in acts against the other party which inhibited or continue to inhibit earning capacity or ability to gain meaningful employment, such as acts of domestic violence. For example, if one spouse so traumatized the other as to require medical or psychiatric treatment, and the victimized spouse has temporarily or permanently lost the ability to work outside the home effectively, that would be highly relevant on the issues of post-divorce maintenance.

Factor 8--Factor 8, which was formerly Factor 4, requires the court to consider whether the party seeking maintenance has the ability to become self-supporting and, if so, then consider the period of time and training necessary therefor.

Factor 9--This factor (which was formerly Factor 5) takes into account whether the party seeking maintenance has lost, or suffered reduction in, lifetime earning capacity as a result of having foregone or delayed education, training, employment, or career opportunities during the marriage. This factor is designed to make sure that, where a homemaker spouse passed up, or deferred, career opportunities during the marriage, the sacrifices entailed be considered in awarding maintenance.

In Treffiletti v. Treffiletti, 252 A.D.2d 635, 675 N.Y.S.2d 192 (3d Dep’t 1998), the appellate court extended a maintenance award to cover the wife through her eligibility for social security where the wife had subordinated her educational and occupational development throughout the marriage in order to raise the children and assist the husband in his career and was incapable of meeting her monthly expenses or maintaining the predivorce lifestyle. It should also be noted that the absence of any lost educational or career opportunities may be a factor in the denial, or limitation, of maintenance. Robinson v. Robinson, 256 A.D.2d 1011, 682 N.Y.S.2d 292 (3d Dep’t 1998).

Factor 10--The inclusion of the presence of children in the homes of the parties as a factor suggests that, in some cases, the custodial parent should be permitted to remain at home with the children and should not be penalized for working inside the home. The phrase “respective homes” suggests that siblings might have been separated or that there is joint or divided custody. Present Factor 10 was formerly Factor 6.

Whether a custodial parent should be awarded maintenance sufficient to permit him or her to remain in the home full-time hinges upon a number of other factors, some of which the court could consider only by resort to the catch-all Factor 20. Is the noncustodial parent possessed of sufficient means to pay such maintenance? How old are the children? What had the parties intended to do when they were still at peace with each other? Are there babysitters available at a reasonable cost? What sort of position and earnings would the custodial parent have? The answer to these questions would tend to indicate whether the custodial parent should or should not be compelled to work outside the home. See Soule v. Soule, 252 A.D.2d 768, 676 N.Y.S.2d 701 (3d Dep’t 1998) (ten years of maintenance allowed to 37-year-old wife, who had custody of 13-year-old daughter and seven-year-old son, and who had demonstrated ability to be retrained); Love v. Love, 250 A.D.2d 739, 673 N.Y.S.2d 175 (2d Dep’t 1998) (five years of maintenance allowed to 39-year-old wife, who had good health and post-high school training, where all four children were of school age and youngest child was 10 years old); see also Love v. Love, 251 A.D.2d 631, 676 N.Y.S.2d 208 (2d Dep’t 1998) (maintenance for 43 year old wife reduced from eight years to five years due, in part to fact that custody of child was placed with husband); Shortis v. Shortis, 274 A.D.2d 880, 711 N.Y.S.2d 578 (3d Dep’t 2000) (where husband had custody of parties’ child and there was no proof that wife was paying any child support, record was held insufficient to support trial court’s award of maintenance to the wife).

Maintenance may also be denied where the child support award places the parents on relatively equal footing. See Gandhi v. Gandhi, 283 A.D.2d 782, 724 N.Y.S.2d 541 (3d Dep’t 2001) (supplementing the wife’s salary with the child support paid by the husband, and taking into account that the husband paying nearly the entire cost of the child’s day care, leaves the parties on an approximately equal financial footing).

Factor 11--This new factor requires the court to consider whether the care of the children, stepchildren, disabled adult children or disabled adult stepchildren, elderly parents or in-laws inhibits or has inhibited a party’s earning capacity. While Factor 10 focuses on the presence of children of the marriage in the homes of the parties, Factor 11 broadens the scope of consideration to adult children of the marriage, to non-marital children, to adult disabled children, and to elderly parents. For example, the court may consider that a spouse cannot work at all, or full-time, because of the need to care for his or her elderly parents or for the elderly parents of the other spouse. Factor 11 refers to “stepchildren” (both minor and adult disabled) without specifying whether the “stepchildren” referenced are the biological children of the other spouse or whether they include the biological children of a third party. Indeed, Factor 11 would permit the court to consider whether a spouse’s employability is impacted by the necessity to care for a minor, non-marital child.

Factor 12--This factor, new in 2010, requires consideration of the inability of a party to obtain meaningful employment due to age or absence from the workforce. While consideration of a party’s absence from the workforce, and the duration of such an absence, has been a factor in many decision, and while the reasons for such an absence are covered in other factors (such as the presence of children in the household), the court is now required to separately consider the inability of a spouse to meaningfully re-enter the workforce due to age or absence from out-of-home employment.

Factor 13--This new as of 2010 factor requires consideration of the necessity to pay for exceptional additional expenses for children, including schooling, day care and medical treatment. The apportionment of day care and medical expenses for minor children is to be accomplished pro rata to income under the Child Support Standards Act, while the court has more discretion in allocating educational expenses between the parents. Under this new factor for maintenance, the court is to take into account both the maintenance-seeking spouse’s obligations to pay for children’s exceptional expenses and the maintenance-paying spouse’s obligations to pay for the same expenses. The expenses to be considered are required to be “exceptional”, meaning more than usual or more than typical.

Factor 14--As when tax consequences were Factor 7, the court is to consider the tax consequences that a maintenance award would have on each party. Periodic support payments made pursuant to a court judgment or decree of separation agreement would be deductible from the payor’s gross income and would constitute taxable income to the recipient. Internal Revenue Code § 71. Depending upon the payor spouse’s tax bracket, at least a portion of maintenance paid and deducted, in effect, is absorbed by the government. Thus, the payor spouse’s net cost is not as high as it may appear. On the other hand, the recipient spouse must pay taxes on maintenance received but whether the net value is significantly lower depends on the amount of the maintenance and the amount of any other taxable income.

It is now not uncommon to see the parties present charts and displays to show the various tax combinations and permutations of various types of awards. Both counsel and the courts have access to computer programs which assist with these sorts of calculations.

Factor 15--This factor, added in 2010, requires consideration of the equitable distribution of marital property. This appears duplicative of Factor 1 which, as previously discussed, requires consideration of the income and property of the parties, including marital property being equitably distributed.

Factor 16--The court is directed to consider the contributions of the maintenance-seeking spouse as a spouse, parent, wage earner, homemaker and career enhancer. This factor was formerly Factor 8. The intent, as with the similar factor for consideration in equitable distribution, is to make certain that the contributions of a spouse, even noneconomic ones, are taken into account when that spouse seeks a support award.

Factor 17--The wasteful dissipation of marital assets has been described as economic “fault.” A waste in marital assets will have resulted in a diminishment in marital property. The concept is that the innocent spouse is entitled to a form of restitution by way of reduced (where the needy spouse was the wrongdoer) or increased (where the supporting spouse commits waste) maintenance payments.

What is and what is not a “wasteful dissipation” is dependent upon the particular circumstances of the case. Extensive gambling losses, clothes and gifts for a new love, large bar tabs, all may be indicative of a “wasteful dissipation.” An occasional extravagance probably should not be regarded as a wasteful dissipation. Indeed, whether family assets have been wasted may be a relative concept and the standard of living of the parties may be a factor. In a family where the assets were plentiful and each spouse bought expensive clothes, the purchase of a fur coat or elegant tuxedo may not be wasteful; in other families it could be wasteful. It will be important to separate true waste from mere differences over spending priorities between people who no longer agree. See Willis v. Willis, 107 A.D.2d 867, 484 N.Y.S.2d 309 (3d Dep’t 1985). This factor was, prior to 2010, factor 9.

The focus in Factor 17 on “marital property” may lead to the conclusion that a waste of separate property is not eligible for consideration. This conclusion is buttressed by the fact that the original version of Factor 9 spoke of “family assets” rather than “marital assets.” However, even a waste of separate property may have its impact on maintenance and may be considered under Factor 20 which allows the court to consider such additional factors as it finds appropriate.

Factor 18--The court is to consider any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration. This factor (which prior to 2010 was factor 10) deals with the problem of a party who seeks to place assets out of his or her control in contemplation of an action in which equitable distribution will be made. For the court to actually set aside the transfer, the court would need jurisdiction over the transferee and a proper basis for doing so, such as proof satisfying the requirements of the Debtor and Creditor Law. Where the transfer cannot be undone, this statutory factor allows the court to award additional maintenance to the victimized spouse.

Factor 19--This factor, which requires the court to consider loss of health insurance in the maintenance determination, was first introduced in 2009 as factor 11. In the 2010 amendments, it emerged as Factor 19.

While the matrimonial court has the authority to order a spouse to purchase or maintain health and hospital insurance for the other spouse or the children, the fact is that where only one spouse works outside the home and has access to group coverage, the other spouse is mostly likely covered as a dependent and will lose dependent status upon divorce. The Legislature has separately added a statute which requires that the parties be notified that, once a judgment has been signed, a party may no longer be eligible for coverage under the other spouse’s plan. DRL § 255.

A nonemployed spouse may obtain continuation coverage through the Federal COBRA statute for up to 36 months; however, the coverage can be costly. Moreover, the continuation coverage ends after 36 months. The loss of health insurance can be financially devastating. Allowing the court to take the financial consequences of loss of health insurance (either immediately or deferred for three years) into account in determining maintenance (and property distribution) permits the court to adjust the property distribution and maintenance awards to account for the additional expense.

The Religious Divorce Factor--N.Y. Dom. Rel. Law § 253 seeks to provide a remedy for the situation where a Jewish husband refuses to sign religious documents needed for a religious divorce. N.Y. Dom. Rel. Law § 253 is designed to force such husbands into voluntarily agreeing to remove “barriers to remarriage” or else be precluded from obtaining a civil divorce judgment. For discussion of the workings of the statute, see the Practice Commentaries accompanying N.Y. Dom. Rel. Law § 253 in McKinney’s Consolidated Laws of New York Annotated. Paragraph (h) of subdivision 5 of Part B of Section 236 requires the court to consider, where appropriate, the effect that a barrier to remarriage would have on the various legislative factors. While the barrier to remarriage issue is not a direct legislative factor on equitable distribution, it is to be considered as a factor which may influence the statutory factors.
 
C236B:37: Post-Divorce Maintenance and Marital Fault

As a result of the 2010 amendment, adding several new factors, the catch-all factor, which had been Factor 12, has now been renumbered as Factor 20.
 
C236B:40: Temporary Maintenance

As noted in the 2011 Supplementary Practice Commentaries on this subject, the income “cap” imposed with respect to the statutory maintenance formula, originally set at $500,000, is subject to increases every two years to account for changes in the consumer price index. As of January 31, 2012, the temporary maintenance income “cap” is $524,000.

In Khaira v. Khaira, 93 A.D.3d 194, 938 N.Y.S.2d 513 (1st Dep’t 2012), the Appellate Division, First Department, made a number of salient observations in the first appellate ruling under the temporary maintenance guidelines statute. The court noted that the statute, rather than aiming to merely “tide over” the non-monied spouse pending the outcome of the case, creates a substantial presumptive entitlement. On the other hand, the amount produced by the guidelines is to cover all of the spouse’s basic living expenses. Since housing costs are just as much a part of basic living expenses as food and clothing, where the court orders the monied spouse to pay housing costs for the non-monied spouse by payment to a third party, such as a mortgagee or a landlord, the court must either adjust the award to account for the housing expense or else explain why it added the housing expense on top of the guideline amount. The court suggested a number of reasons why adding housing expenses may be appropriate. For example, some part of a mortgage payment may be treatable as a housing expense with the balance being the upkeep on a marital investment.

The court in Khaira also held that it is proper to compute the guidelines based on gross income as reported on the payor’s federal income tax return, even if these includes bonuses. As noted in the 2011 Supplementary Practice Commentaries on this subject, prior to Khaira, the Supreme Court in A.C. v. D.R., 32 Misc.3d 293, 927 N.Y.S.2d 496 (Sup. Ct. Nassau County 2011), held that it is unjust and inappropriate to strictly apply the statutory formula in a circumstance where the payor spouse is obligated to pay shelter expenses, separate and apart from temporary maintenance and child support.
 
2011

C236B:11: Opting Out Agreements--Generally

C236B:15: Spousal Maintenance and Lump Sum Settlements

C236B:40: Temporary Maintenance

C236B:45: Modification
 
C236B:11: Opting Out Agreements--Generally

In the main volume, at pages 152-155, there is question of Hurwitz v. Sher, 982 F.2d 779 (2d Cir. 1992), cert. denied, 113 S.Ct. 2345, 508 U.S. 912, 124 L.Ed.2d 255, which held that broad language in a prenuptial agreement waiving rights in the pension of the other spouse is not sufficient to meet the requirements of the federal ERISA statute (Employee Retirement Income Security Act, 29 U.S.C. § 1055). As also noted in the main volume at page 154, despite the holding in Hurwitz, the Appellate Division, Second Department has held that an antenuptial agreement, which contained a general waiver by each party of claims to the separate, premarriage property of the other party and to increases in the value thereof due to personal efforts of the owner, effectively waive any claim by the wife to any portion of the husband’s pension. Moor-Jankowski v Moor-Jankowski, 222 A.D.2d 422, 634 N.Y.S.2d 728 (2d Dep’t 1995). The court held that the spouse consent provisions of ERISA apply only to the plan participant’s current spouse. In Strong v. Dubin, 75 A.D.3d 66, 901 N.Y.S.2d 214 (1st Dep’t 2010), the Appellate Division, First Department, citing the Second Department’s earlier decision, likewise held that, for purposes of equitable distribution, a waiver of any interest in a pension as marital property by an otherwise valid prenuptial agreement is not prohibited by ERISA. The First Department stated that, while a prenuptial agreement will not constitute an effective waiver of spousal survivorship benefits mandated by ERISA unless it conforms to those waiver requirements, ERISA does not preempt or preclude the recognition, implementation, or enforcement of an otherwise valid prenuptial agreement with regard to a divorce proceeding. In reaching this conclusion, the First Department overturned its prior ruling to the contrary in Richards v. Richards, 232 A.D.2d 303, 648 N.Y.S.2d 589 (1st Dep’t1996) (discussed at pages 154-155 of the main volume), directing that Richards no longer be followed. In Strong, the First Department quoted, approvingly, from Edmonds v. Edmonds, 184 Misc.2d 928, 710 N.Y.S.2d 765 (Sup. Ct. Onondaga County 2000):

Apart from the survivor benefit of [the Retirement Equity Act], ERISA does not mandate that other benefits be provided to a participant’s spouse. In fact, ERISA expressly prohibits alienation of benefits by the plan participant, except by a Qualified Domestic Relations Order(QDRO) issued by a State court in a matrimonial action under the State’s domestic relations law (29 USC § 1056[d]). ERISA creates no substantive rights in the case of divorce, but only accommodates, by the provisions governing QDROs, rights created by state matrimonial law. In New York, vested or matured rights in a pension plan are considered marital property subject to distribution in a divorce action to the extent that the benefits result from employment by the participant after the marriage and before the commencement of the divorce action. There is nothing in the matrimonial law of New York prohibiting a spouse from waiving his or her interest in such marital property by agreement made before or during the marriage in accordance with Domestic Relations Law § 236(B)(3). 184 Misc.2d 928, 931, 710 N.Y.S.2d 765,768-769 (Sup. Ct. Onondaga County 2000).
 
C236B:15: Spousal Maintenance and Lump Sum Settlements

In 2010, the Legislature amended Section 236, Part B, to provide for a formula-based approach to the determination of applications for temporary maintenance. The statute, which appears as subdivision 5-a to Section 236, Part B, applies to actions commenced on or after October 13, 2010. Under the new statutory approach, unless the parties have made an agreement otherwise, the court is use a guideline to ascertain a presumptive amount of temporary maintenance to be award. A validly executed agreement or stipulation voluntarily entered into between the parties in an action commenced after October 13, 2010, which is presented to the court for incorporation in an order, is to include a provision stating that the parties have been advised of the provisions of the statute and that the presumptive award provided for therein results in the correct amount of temporary maintenance. Thus, it appears that, in order for the parties to avoid the application of the temporary maintenance guideline approach through provision in a prenuptial agreement, the prenuptial agreement must contain a provision stating that the parties have been advised of the statutory provisions, that the presumptive award provided for therein results in the correct amount of temporary maintenance, and setting forth the parties’ reasons for deviating from the statutory approach. If an agreement fails to contain the required language, the result would appear to be that the court would determine the issue of temporary maintenance under the statutory provision, as opposed to having temporary maintenance viewed as waived or as limited by the terms of the agreement.
 
C236B:40: Temporary Maintenance

In 2010, the Legislature amended Section 236, Part B, to provide for a formula-based approach to the determination of applications for temporary maintenance. The statute, which appears as subdivision 5-a to Section 236, Part B, applies to actions commenced on or after October 13, 2010. Under the new statutory approach, unless the parties have made an agreement otherwise, the court is use a guideline to ascertain a presumptive amount of temporary maintenance to be award.

To calculate the award, the court is first to ascertain the income of the payor spouse, meaning the spouse with the higher income. The spouse with the lower income is the payee spouse. The income used is the income that would be used in the calculation of child support under the Child Support Standards Act, together with any otherwise unaccounted for income from income-producing property subject to equitable distribution. But, for purposes of the statutory formula, the payor’s income is subject to an “income cap”, which is $500,000 (which cap amount is subject to increases, beginning January 31, 2012 and every two years thereafter, to account for changes in the consumer price index).

Where the payor’s income is less than or equal to the income cap, the court is to ascertain the guidelines amount by performing two separate calculations. The first calculation requires subtracting 20% of the income of the payee from 30% of the income (up to the cap) of the payor. The second of the two calculations is multiplying the total income of the parties (subject to the “capping” of the payor’s income) by 40%. The lower of the two thus calculated figures is the presumptive temporary maintenance award (on an annualized basis).

For example, assume that plaintiff’s income is $100,000 per year and that the defendant’s income is $50,000 per year. Under the first calculation, 30% of the payor’s income would be $30,000, 20% of the payee’s income would be $10,000, and subtracting $30,000 from $10,000 would put the result of the first calculation at $20,000. Under the second calculation, 40% of the combined income is $60,000 (40% of $150,000) and subtracting that by the payee’s income of $50,000, leaves $10,000, which is thus the result of the second calculation. Since the lower of the two calculations in this illustration is the second one, it is the second one that is used. The guideline temporary maintenance would be $10,000 per year, or $833.33 per month, or $192.31 per week.

Under the statute, the court is supposed to determine the guideline duration of temporary maintenance by considering the length of the marriage. While, under prior law, temporary maintenance would terminate upon the entry of the final judgment (including, for example, a judgment of dismissal). Under the 2010 statute, temporary maintenance terminates upon the issuance of the final award of maintenance or the death of either party, whichever occurs first. But the court apparently may limit the duration of temporary maintenance so that it ends prior to the making of a final award. This may reflect a concern that, where the marriage is of short duration, the temporary maintenance award should not, simply because the case becomes protracted, persist for a long time. For example, if the parties were married only a short time-measured from the date of marriage to the date of commencement of the action-the court could limit the duration of the temporary maintenance award to the length of the marriage, though it could, apparently, make the duration of the award longer or shorter.

In high income cases, where the payor’s income exceeds the income cap, the court may consider making a further award based upon the income above the cap, upon consideration of statutory factors, as well as any other factor the court finds proper. The statutory factors for this purpose are:

(1) the length of the marriage;

(2) the substantial differences in the incomes of the parties;

(3) the standard of living of the parties established during the marriage;

(4) the age and health of the parties;

(5) the present and future earning capacity of the parties;

(6) the need of one party to incur education or training expenses;

(7) the wasteful dissipation of marital property;

(8) the transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;

(9) the existence and duration of a pre-marital joint household or a pre-divorce separate household;

(10) acts by one party against another that have inhibited or continue to inhibit a party’s earning capacity or ability to obtain meaningful employment, including acts of domestic violence;

(11) the availability and cost of medical insurance for the parties;

(12) the care of the children or stepchildren, disabled adult children or stepchildren, elderly parents or in-laws that has inhibited or continues to inhibit a party’s earning capacity or ability to obtain meaningful employment;

(13) the inability of one party to obtain meaningful employment due to age or absence from the workforce;

(14) the need to pay for exceptional additional expenses for the child or children, including, but not limited to, schooling, day care and medical treatment;

(15) the tax consequences to each party;

(16) marital property subject to equitable distribution;

(17) the reduced or lost earning capacity of the party seeking temporary maintenance as a result of having foregone or delayed education, training, employment or career opportunities during the marriage; and

(18) the contributions and services of the party seeking temporary maintenance as a spouse, parent, wage earner and homemaker and to the career or career potential of the other party; and

The court is required to set forth the factors it considered and the reasons for its decision-a requirement that cannot be waived. As a practical matter, since temporary maintenance is most often decided on papers, without a hearing, it may be difficult for a court to develop an accurate assessment of the facts underlying these statutory factors.

Where the guideline amount of temporary maintenance would reduce the payor’s income below the self-support reserve for a single person, the presumptive amount of the guideline amount of temporary maintenance shall be the difference between the payor’s income and the self-support reserve. If the payor’s income is below the self-support reserve, there is a rebuttable presumption that no temporary maintenance should be awarded.

The court is to apply the presumptive guidelines unless the court finds that the presumptive award is unjust or inappropriate and adjusts the presumptive award of temporary maintenance accordingly based upon consideration of a set of legislative factors, as well as another factor that the court finds just and proper. The statutory factors for this purpose are:

(1) the standard of living of the parties established during the marriage;

(2) the age and health of the parties;

(3) the earning capacity of the parties;

(4) the need of one party to incur education or training expenses;

(5) the wasteful dissipation of marital property;

(6) the transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;

(7) the existence and duration of a pre-marital joint household or a pre-divorce separate household;

(8) acts by one party against another that have inhibited or continue to inhibit a party’s earning capacity or ability to obtain meaningful employment, including domestic violence;

(9) the availability and cost of medical insurance for the parties;

(10) the care of the children or stepchildren, disabled adult children or stepchildren, elderly parents or in-laws that has inhibited or continues to inhibit a party’s earning capacity or ability to obtain meaningful employment;

(11) the inability of one party to obtain meaningful employment due to age or absence from the workforce;

(12) the need to pay for exceptional additional expenses for the child or children, including, but not limited to, schooling, day care and medical treatment;

(13) the tax consequences to each party;

(14) marital property subject to equitable distribution;

(15) the reduced or lost earning capacity of the party seeking temporary maintenance as a result of having foregone or delayed education, training, employment or career opportunities during the marriage; and

(16) the contributions and services of the party seeking temporary maintenance as a spouse, parent, wage earner and homemaker and to the career or career potential of the other party.

Where the court finds that the presumptive award of temporary maintenance is unjust or inappropriate and the court adjusts the presumptive award of temporary maintenance, it must set forth in a written order, the amount of the unadjusted presumptive award of temporary maintenance, the factors it considered, and the reasons that the court adjusted the presumptive award of temporary maintenance. This requirement cannot be waived. Again, as a practical matter, since temporary maintenance is most often decided on papers, without a hearing, it may be difficult for a court to develop an accurate assessment of the facts underlying these statutory factors.

Where either or both parties are unrepresented, the court shall not enter a temporary maintenance order unless the unrepresented party or parties have been informed of the presumptive award of temporary maintenance.

A validly executed agreement or stipulation voluntarily entered into between the parties in an action commenced after October 13, 2010, which is presented to the court for incorporation in an order, is to include a provision stating that the parties have been advised of the provisions of the statute and that the presumptive award provided for therein results in the correct amount of temporary maintenance. In the event that such agreement or stipulation deviates from the presumptive award of temporary maintenance, the agreement or stipulation must specify the amount that such presumptive award of temporary maintenance would have been and the reason or reasons that such agreement or stipulation does not provide for payment of that amount. Such provision may not be waived by either party or counsel. Any court order incorporating a validly executed agreement or stipulation which deviates from the presumptive award of temporary maintenance shall set forth the court’s reasons for such deviation. If an agreement does not contain the statutory language, it may be that the agreement (even if provides for a waiver of temporary maintenance or for a lesser award) is no bar to the court’s application of the statutory approach. Note that prior to the enactment of the 2010 statute, it was held that, where an antenuptial agreement is in effect, any temporary maintenance award must be in accordance with the terms of the agreement. Peerce v. Peerce, 88 A.D.2d 832, 451 N.Y.S.2d 139 (1st Dept. 1982).

If a party has defaulted, or if the court lacks sufficient information to determine the parties’ gross income, the court is to base its temporary maintenance award based upon the needs of the payee or the standard of living of the parties prior to commencement of the divorce action, whichever is greater. Such order may be retroactively modified upward without a showing of change in circumstances upon a showing of newly discovered or obtained evidence.

In A.C. v. D.R., 32 Misc.2d 293, 927 N.Y.S.2d 496 (Sup. Ct. Nassau County 2011), the court held that it is unjust and inappropriate to strictly apply the statutory formula in a circumstance where the payor spouse is obligated to pay shelter expenses, separate and apart from temporary maintenance and child support. In the cited case, the husband was paying for all of the “billed” expenses of the marital residence, including real estate taxes, utilities, homeowner’s insurance, domestic help, sanitation, snow removal and other expenses. Since he was paying these expenses, the amount of his income needed to cover these expenses should, said the court, be considered unavailable as a maintenance expense. Accordingly, the court calculated temporary maintenance pursuant to the statutory formula after deduction of these expenses from the payor’s income. An alternative approach would be to not make such a deduction and to require the payee to pay some or all of the expenses. Making some adjustment for shelter and other expenses paid directly by the payor for purposes of the temporary maintenance formula seems consistent with the rule that an adjustment is required for these expenses in connection with the child support formula. (See Practice Commentary to Section 240).
 
C236B:45: Modification

In 2010, the Legislature significantly changed the law applicable to the modification of child support in cases where the parties had agreed to the amount of child support. Under the legislation, effective as to applications made after October 13, 2010 and with respect to child support agreements made after that date. Under the legislation, found in subdivision 9(b)(2) of Section 236, Part B, the court may modify an order of child support, including an order incorporating without merging an agreement or stipulation of the parties, upon a showing of a substantial change in circumstances. Incarceration is not a bar to finding a substantial change in circumstances provided such incarceration is not the result of nonpayment of a child support order or an offense against the custodial parent or child who is the subject of the order or judgment. In addition, unless the parties have specifically opted out of the provisions added in 2010 in agreement made after the statutory effective date, the court may modify an order of child support where:

(1) three years have passed since the order was entered, last modified or adjusted; or

(2) there has been a change in either party’s gross income by fifteen percent or more since the order was entered, last modified, or adjusted. A reduction in income is not to be considered as a ground for modification unless it was involuntary and the party has made diligent attempts to secure employment commensurate with his or her education, ability, and experience.

No modification or annulment made under the 2010 legislation is to reduce or annul any arrears of child support which have accrued prior to the date of application to annul or modify any prior order or judgment as to child support. Such modification may increase child support nunc pro tunc as of the date of application based on newly discovered evidence. Any retroactive amount of child support due as the result of the modification shall be paid in one sum or periodic sums, as the court directs, taking into account any temporary or partial payments which have been made. Any retroactive amount of child support due shall be support arrears/past due support. In addition, such retroactive child support shall be enforceable in any manner provided by law including, but not limited to, an execution for support enforcement pursuant to CPLR 5241(b). When a child receiving support is a public assistance recipient, or the order of support is being enforced or is to be enforced Section 111-g of the Social Services Law, the court is to establish the amount of retroactive child support and notify the parties that such amount shall be enforced by the support collection unit pursuant to an immediate execution for support enforcement or in such periodic payments as would have been authorized had such an execution been issued. In such case, the court shall not direct the schedule of repayment of retroactive support.
 
PRACTICE COMMENTARIES

by Alan D. Scheinkman

Introduction

Part A
 
C236A:1: Who May Receive Alimony
C236A:2: Action in Which Alimony Obtainable
C236A:3: Alimony and the Ex Parte Foreign Divorce
C236A:4: The Role of Fault
C236A:5: Failure of Proof
C236A:6: Alimony Standards and Criteria
C236A:7: Commencement, Duration and Termination of Alimony
C236A:8: Modification

Part B
 
C236B:1: The Equitable Distribution Law Effective Date
C236B:2: The Constitutionality of Retroactive Effect of the Equitable Distribution Law
C236B:3: Actions Subject to the Equitable Distribution Law
C236B:4: Marital Property--Generally
C236B:5: Marital Property--Professional Practices
C236B:6: Marital Property--Professional Licenses and Degrees
C236B:6A: Marital Property--Avoiding Overlap Between Practice and License Awards
C236B:7: Marital Property--Pension and Retirement Benefits
C236B:8: Separate Property--Generally
C236B:9: Distributive Awards
C236B:10: Post-Divorce Maintenance Redefined
C236B:11: Opting Out Agreements--Generally
C236B:12: Opting Out Agreements--The Formalities
C236B:13: Opting Out Agreements--Testamentary Provisions
C236B:14: Opting Out Agreements--Property Settlements
C236B:15: Opting Out Agreements--Spousal Maintenance and Lump Sum Settlements
C236B:16: Opting Out Agreements--Child Custody Provisions
C236B:17: Opting Out Agreements--Child Support Provisions
C236B:18: Open Court Stipulations of Settlement
C236B:19: Disclosure by Net Worth Statement
C236B:20: Disclosure Generally
C236B:21: Disclosure of the “Merits”
C236B:22: Disclosure in Action to Rescind Agreements
C236B:23: Equitable Distribution: When Available
C236B:24: Marital Property to be Distributed “Equitably”
C236B:25: Equitable Distribution--The Legislative Factors
C236B:26: Valuation Dates and Proof
C236B:27: Equitable Distribution and Marital and Economic Fault
C236B:28: Equitable Distribution--Other Possible Factors
C236B:29: Equitable Distribution--The Use of Distributive Awards
C236B:30: Separate Property to Remain Separate
C236B:31: Exclusive Occupancy and Possession of the Marital Home
C236B:32: Mandate to Distribute Property
C236B:33: Burden of Proof
C236B:34: The Decision and Its Review
C236B:35: Post-Divorce Maintenance--General Concepts
C236B:36: Post-Divorce Maintenance--The Legislative Factors
C236B:37: Post-Divorce Maintenance and Marital Fault
C236B:38: Post-Divorce Maintenance--The Use of Discretion
C236B:39: Effective Date of Post-Divorce Maintenance and Temporary Maintenance
C236B:40: Temporary Maintenance
C236B:41: Tax Considerations of Maintenance Awards
C236B:42: Child Support and Tax Implications of Child Support
C236B:43: Health and Life Insurance
C236B:44: Form of the Award and Denial of Matrimonial Relief
C236B:45: Modification
C236B:46: Practice Considerations
C236B:47: Enforcement
C236B48: Interim Property Restraints--“Automatic Orders”

Introduction

Chapter 281 of the Laws of 1980, enacted on June 19, 1980, achieved a major and dramatic overhaul of the New York statutes which govern the economic life of the family and measure the rights and obligations of family members upon dissolution of the family unit. This statute, commonly but unofficially referred to as the Equitable Distribution Law, generally cleansed the Domestic Relations Law, the Family Court Act, the General Obligations Law, and other chapters of out-moded distinctions based solely upon gender. Of greater long-range significance, the Equitable Distribution Law made a profound change in the standards which govern the division of property upon dissolution of marriage. Prior to the enactment of the statute, property was generally divided between spouses on the basis of legal title,i.e., the spouse who held title to property was awarded an interest equal to the interest that he or she held under title principles. Thus, a spouse who was a joint tenant with respect to a property item was entitled to no less, and no more than, one half of the value of the property. A spouse who held sole legal title was entitled to the entire property and the non-titled spouse would receive nothing. In practice, the title concept worked a great hardship upon a spouse, often the wife, whose mate accumulated property during marriage and held title in his or her name only. When the marriage was dissolved, absent actual fraud or other ground for equity, intervention, ownership of all the property went to the title-holding spouse, notwithstanding the contributions made toward the property or toward the marriage by the non-titled spouse.

With the enactment of the Equitable Distribution Law, the marriage relationship viewed, more modernly, as an economic partnership. “Upon its dissolution, property accumulated during the marriage should be distributed in a manner which reflects the individual needs and circumstances of the parties regardless of the name in which such property is held.” (Governor’s Memorandum of Approval, McKinney’s 1980 Session Laws, p. 1863). For this reason, the Equitable Distribution Law has been described as “the most sweeping reform of the divorce laws in this State since the Divorce Reform Act of 1966.” Id.

Since the enactment of the Equitable Distribution Law, concern has been expressed that the concept of marriage as an economic partnership, while recognized in the decisions, has not been truly taken into account in the actual division of property in particular cases. At the same time, national surveys have reported that women and children tend to suffer an immediate decline in their standard of living in the aftermath of divorce while men enjoy an increased standard of living. Hearings before the State Senate and Assembly Judiciary Committees in 1985, and the 1986 Report by the New York State Task Force on Women in the Courts, attested to the view that the Equitable Distribution Law had not, at least as applied, materially benefitted economically dependent spouses and may have, instead, led to additional unfairness and undue hardship. While the statute had been amended several times in the years since 1980, in 1986, the Legislature enacted several amendments designed specifically to provide additional remedies to economically dependent spouses. In 2009, the Legislature amended the statute to impose self-executing restraints on the parties’ economic conduct during the pendency of the action and also made the loss of health insurance upon divorce a factor to be considered in equitable distribution and maintenance determinations.

The Equitable Distribution Law was not limited to reform of the guidelines for property distribution. The concept of alimony was discarded and replaced with a new system of maintenance. As originally designed, maintenance was to concentrate on the ability of a dependent spouse to become self-supporting and to permit the court to closely tailor spousal support to address the needs and circumstances of particular parties. Under alimony law, the court could not properly direct that alimony payments terminate after the passage of a fixed period of time. Under the maintenance principles, the court is allowed, in advance, to provide that maintenance is to be paid only for a limited time, during which the dependent spouse should seek to obtain employment skills and qualifications and after which no further spousal support need be paid. The maintenance concepts introduced by the Equitable Distribution Law proved to be the most controversial and criticized feature of the statute. One of the focuses of the 1986 amendments was to encourage, not discourage, the award of indefinite maintenance to economically dependent spouses, primarily women, who find that, after years as a homemaker, entry into the marketplace is often difficult and who face financial hardship following divorce. Likewise, the 1986 legislation sought to foster long-term maintenance awards to younger dependent spouses who have young children and who desire to remain at home with them or who find the cost of alternative child care increasingly prohibitive.

In recent years, the Legislature has also focused on the establishment and enforcement of child support orders. While child support was once the domain of Section 236, Part B, the principle statute pertaining to child support, including the operative statutory provisions of the Child Support Standards Act, is Section 240. Included in the revised legislation are significant mandates for the preservation of health and life insurance coverage for dependent spouses and children, with the loss of spousal coverage now also being a factor in equitable distribution and maintenance determinations.

The Equitable Distribution Law provisions with respect to property distribution, maintenance, spousal agreements, and other matters appear in Part B of DRL § 236. Prior to the enactment of the Equitable Distribution Law, DRL § 236 was concerned exclusively with the award of alimony to a wife. Now the statute is divided into two parts: Part A, which retains the former alimony provisions for application to cases commenced prior to the July 19, 1980, effective date of the Equitable Distribution Law, and Part B which applies to cases commenced on or after July 19, 1980.

Since Part A cases will always remain subject to Part A, attention is devoted in these commentaries to the portions of Part A that remain relevant. This relevancy is however greatly diminished by the passage of time. Part A will be applicable to requests for modification of Part A alimony determinations. But, since the last of the Part A judgments being rendered over 20 years ago, the number of Part A cases subject to alimony modification is comparatively small.

Reference is also made, periodically, in the comments to Part B to old law principles so as to identify those areas where the law has been changed, modified or continued.

Part A
 
C236A:1: Who May Receive Alimony

The Equitable Distribution Law re-enacted old Section 236 as new Section 236, Part A, subdivision 1 and made it applicable to certain pending or concluded cases. In re-enacting the alimony statute, only two types of changes were made; one substantive, the other stylistic. The stylistic changes were to use the words “this chapter” in place of the words “domestic relations law” in each instance where a reference is made to another DRL provision. The substantive change is far more significant. In each instance where the word “wife” or the word “husband” appeared, the words “either spouse” or “other spouse” now appear.

Until the passage of the Equitable Distribution Law, former Section 236 provided that the court, in certain types of actions, could “direct the husband to provide suitably for the support of the wife ....” Thus, only wives could receive alimony and that only husbands could be compelled to pay alimony. In this regard, Section 236 was part of a statutory scheme pursuant to which allowances in matrimonial actions could be made only to wives and made and enforced against only husbands.

In 1979, United States Supreme Court spoke out and held that an Alabama statute providing for wives-only alimony was violative of the equal protection clause of the Fourteenth Amendment to the federal Constitution. Orr v. Orr, 99 S.Ct. 1102, 440 U.S. 268, 59 L.Ed.2d 306. A six-member majority held that the husband had sufficient standing to raise the constitutional challenge because he was made to carry a burden (i.e. pay alimony) which he would not bear if he were a she. 440 U.S. at 273.

Following the Orr decision, former Section 236 was judicially rewritten so as to permit husbands to obtain alimony provided the statutory and judicial criteria applicable to alimony applications are otherwise satisfied. SeeMatter of Wood v. Wood, 104 Misc.2d 109, 428 N.Y.S.2d 136 (Family Ct. Queens County 1980) (support to husband denied in view of his misconduct).

The present Section 236 provides generally that “the provisions of part A shall be controlling with respect to any action or proceeding commenced prior to the date on which the provisions of this section as amended become effective....” (The question of the effective date of Part B, Equitable Distribution, is considered in C236B:1).

The Equitable Distribution Law was signed into law on June 19, 1980 and became effective 30 days later, on July 19, 1980. L.1980, c. 281, §§ 9, 47.

Thus, in any action or proceeding which qualifies under Part A, subdivision 1 and which was commenced before July 19, 1980, both the husband and the wife may apply to the court for an award of temporary or permanent alimony.

Based upon the broad modification powers given the court, where, in a qualifying action commenced before July 19, 1980, the court has awarded alimony to the wife, the husband should be able, if circumstances warrant, to apply to annul that direction and request that he be the party to be supported. He could also seek support even where no alimony was awarded the wife. The husband would have to satisfy the other statutory and case law criteria, especially those relating to need. However, where a needy husband was denied support because he was not eligible for alimony under former Section 236, he should not be required to show a factual change in circumstances in order to obtain a modification which would allow him support; the change in circumstances being a change in the law which now permits needy husbands to obtain alimony.

It should be noted that the Equitable Distribution Law gender-neutralized a considerable number of other statutes, both within and without the Domestic Relations Law. These statutes include: DRL §§ 233, 241, 243, 244, 245 (enforcement remedies); Family Court Act §§ 412, 413, and 422 (support obligations).
 
C236A:2: Actions in Which Alimony Obtainable

Section 236, Part A, subdivision 1, provides, as did former Section 236, that a direction for support may be made in any action or proceeding “(1) during the lifetime of both parties to the marriage to annul a marriage or declare the nullity of a void marriage, or (2) for a separation, or (3) for a divorce...” Because alimony is a creature of statute and the right to alimony does not spring from common law (Querze v. Querze, 290 N.Y. 13, 47 N.E.2d 423 [1943],motion denied 290 N.Y. 765, 926, 50 N.E.2d 102, 308), alimony may be awarded only in proceedings or actions specified by the statute. The listing of qualifying actions made in Section 236, Part A, subdivision 1, has not been uniformly adopted elsewhere in the Domestic Relations Law. For example, the list of actions or proceedings in which counsel fees may be awarded pursuant to DRL § 237 is more expansive. A different formulation of matrimonial actions in which maintenance, equitable distribution and distributive awards and other relief may be sought is provided for in the equitable distribution part of new Section 236. See DRL § 236, Part B, subdivisions 2 and 5.

The device of numbering the categories of actions or proceedings in which alimony is obtainable was used to assure that the restrictions imposed in annulment and declaration of nullity actions would be referable to those actions alone and not applicable to actions for separation and divorce. The restriction limits the availability of alimony to those annulment and declaration of nullity actions which were “brought” during the life-time of both parties.

An action brought in New York to enjoin the other spouse from prosecuting a matrimonial action elsewhere would not be within the statutory definition. Rosenbaum v. Rosenbaum, 309 N.Y. 371, 130 N.E.2d 902 (1955). Rosenbaum was strictly an action for an injunction; no matrimonial relief from the New York courts was requested. However, if the plaintiff joined an injunction request with a cause of action for divorce, separation, or annulment or declaration of nullity, the presence of a qualifying cause of action would bring the action within the statute, notwithstanding the existence of a non-qualifying claim.

The distinction between an action to declare the nullity of a void marriage and an action to declare the nullity of a purported foreign dissolution of that marriage is also noted. An action to declare the nullity of a foreign dissolution would not be within the statute was expressly sustained in Deshler v. Deshler, 55 Misc.2d 563, 285 N.Y.S.2d 444 (Sup.Ct. Sullivan County 1967). The court held that an action to declare the nullity of a foreign dissolution already concluded is not within Section 236. The court did award counsel fees to the plaintiff, ruling that the action was within Section 237. This point was brought home in Felt v. Felt, 93 A.D.2d 396, 461 N.Y.S.2d 835 (1st Dept. 1983), affirmed for reasons stated by Appellate Division, 62 N.Y.2d 691, 476 N.Y.S.2d 537, 465 N.E.2d 44 (1984).

In Felt, the plaintiff brought an action in 1978 seeking a declaration that a prior Dominican Republic divorce decree was null and void and that she, not another woman, was the lawful wife of the defendant. In November 1981, the plaintiff sought to discontinue her action so that she might bring a divorce action against the defendant as to which equitable distribution would apply. The court concluded, from the Part A list, that the plaintiff’s pending action was not mentioned and, therefore, Part A was inapplicable to her declaratory judgment action. On the other hand, an action for a declaration of the validity of a marriage is covered by Part B. Since the plaintiff’s action was not covered by Part A in the first place, the Appellate Division, by a bare majority allowed her to discontinue it so that she could seek economic relief under Part B. The dissenters argued that Part A sweeps within it actions to declare the nullity of a void marriage and, in essence, plaintiff was seeking such a declaration as to the marriage between defendant and the other woman. The Court of Appeals accepted the view of the majority.
 
C236A:3: Alimony and the Ex Parte Foreign Divorce

The fifth sentence of Section 236, Part A, subdivision 1, states that alimony may be awarded “notwithstanding that the court refuses to grant the relief requested by either spouse (1) by reason of a finding by the court that a divorce, annulment or judgment declaring the marriage a nullity had been previously granted to either spouse in an action in which jurisdiction over the person of the other spouse was not obtained ...”. The phrase “relief requested” refers to the matrimonial relief sought in the action: divorce, separation, annulment or declaration of nullity of a void marriage.

The same sentence was contained in former Section 236, only it has been gender-neutralized. The substantive provisions of this sentence were carried into former Section 236 in 1962 from Section 1170-b of the Civil Practice Act.

The sentence is an outgrowth of the concept of “divisible divorce”. In Estin v. Estin, 68 S.Ct. 1213, 334 U.S. 541, 92 L.Ed. 1561 (1948), affirming 296 N.Y. 308, 73 N.E.2d 113 (1947), a New York wife brought a New York action for separation, obtained a separation judgment, and received an award of permanent alimony. The husband went to Nevada, instituted an action for divorce and had constructive service by publication made upon the wife. A decree was entered in Nevada divorcing the parties and making no provision for the wife’s support. The husband stopped paying alimony under the New York separation judgment, claiming that alimony had been eliminated by the Nevada decree.

The New York courts and the U.S. Supreme Court ruled that while the Nevada decree was entitled to recognition on the question of divorce, the Nevada decree could not adjudicate the wife’s rights under the prior New York separation judgment where the wife had not been personally served nor appeared in the Nevada proceeding.

The wife in Estin had been protected because she had received an alimony award in New York before the Nevada decree was entered. Section 1170-b of the Civil Practice Act (the forerunner of our present Part A, subd. 1, provision) was enacted in 1953 to protect a wife whose husband obtained a foreign divorce decree before support could be obtained in a New York proceeding.

The constitutionality of Section 1170-b of the CPA was tested in the famous case of Vanderbilt v. Vanderbilt. There the parties were married in Connecticut and took up residence in California. The wife subsequently moved to New York and instituted a separation action which was dismissed for failure to comply with the one-year residency requirement. The husband brought a divorce action in Nevada and had the wife served with process in New York. The wife failed to appear in the Nevada action and a divorce decree was entered. The wife brought another separation action in New York and sought an award of alimony.

The lower courts dismissed the separation action on the strength of the Nevada decree but awarded alimony. This determination was upheld by the New York Court of Appeals and by the U.S. Supreme Court. The Court of Appeals concluded that Section 1170-b was designed to remove the procedural bar against a wife obtaining support in New York after and despite a foreign divorce and ruled that the judgment granted in Vanderbilt was within the statute. The Court also held that the wife was entitled to the statutory protection even where the parties had not lived together in New York. The Court ruled that, on the husband’s full faith and credit argument, that the “part of a foreign (nonpersonal service but otherwise jurisdictionally valid) divorce decree which dealt with status had to be given effect in New York as terminating the marriage but was entitled to no effect at all so far as support or other property rights were concerned.” 1 N.Y.2d 342, 351, 153 N.Y.S.2d 1, 7, 135 N.E.2d 553 (1956).

The U.S. Supreme Court affirmed, 77 S.Ct. 1360, 354 U.S. 416, 1 L.Ed.2d 1456 (1957). “Since the wife was not subject to its jurisdiction, the Nevada divorce court had no power to extinguish any right she had under the law of New York to financial support from her husband.” 354 U.S. at 418.

As a result, the first numbered clause of the fifth sentence of Section 236, Part A, subdivision 1, authorized the court to award alimony where matrimonial relief must be denied because of a prior decree which divorced the parties, annulled the marriage or declared the marriage void, provided that “jurisdiction over the person” of the spouse who now seeks support was not obtained.

As evidenced by the Vanderbilt case, the phrase “jurisdiction over the person” means true in personam jurisdiction. The protection of the statute is open to spouses who were never served with anything in any manner as well as to spouses who were served in a fashion which was sufficient to give the foreign court jurisdiction over the marital res but not over his or her personal property rights (such as by publication or where a nondomiciliary spouse not subject to any long-arm statute, is served out of the foreign jurisdiction).

Lansford v. Lansford, 96 A.D.2d 832, 465 N.Y.S.2d 583 (2nd Dept. 1983), presents an illustration of the limited effect of an ex parte foreign decree. In that case, the husband obtained a South Carolina divorce upon his wife’s default. Since the Appellate Division ruled that the wife was not a resident of South Carolina, the South Carolina decree was binding upon her only to the extent that it extinguished the marital relationship. The wife’s economic and property rights were controlled by New York law. Thus, while the court was compelled to dismiss the claims for divorce and separation, presented in her New York action, on the basis of the South Carolina determination, the New York action remained viable for the purposes of obtaining resolution of her property and economic rights.

This principle is further illustrated in Matter of Stump v. Stump, 89 A.D.2d 1029, 454 N.Y.S.2d 333 (3rd Dept. 1982). In that case, the wife obtained support in Family Court. The husband, after twice unsuccessfully seeking modifications, obtained a default divorce in Nevada. The Third Department ruled that the ex parte Nevada divorce did not divest the Family Court of jurisdiction to enforce its prior support order.

The New York plaintiff, to be entitled to alimony, had to establish that he or she would have been entitled to matrimonial relief (divorce, separation, annulment, declaration of nullity) but for the effect of the foreign ex parte decree. In other words, the plaintiff need show the existence of marital misconduct by the other spouse. This could have required a trial and, under CPA 1170-b, it was held that there was no predicate in the statute for an award of pendente lite support. SeeDegen v. Degen, 15 A.D.2d 955, 226 N.Y.S.2d 605 (2nd Dept. 1962) and cases cited therein. Under the DRL, there is at least one case which held that temporary alimony was available. Iverson v. Iverson, 42 Misc.2d 338, 247 N.Y.S.2d 960 (Sup.Ct. N.Y. County 1964). Iverson relied upon the sentence of former Section 236 which provided that alimony may be directed in the final judgment or “by one or more orders from time to time before or subsequent to final judgment ....” A further sentence of the statute went on to provide that alimony may be awarded notwithstanding an ex parte foreign divorce decree. These provisions were carried into DRL § 236, Part A, subd. 1.

The second qualification was that the party seeking support must not have done anything affirmative to place himself or herself before the jurisdiction of the foreign tribunal. Thus, where the foreign divorce was bilateral (both parties having appeared or having consented to jurisdiction), “jurisdiction over the person” of the spouse seeking support would have been obtained and the statute would not be applicable. SeePierot v. Pierot, 49 A.D.2d 838, 373 N.Y.S.2d 592 (1st Dept. 1975); Merrick v. Merrick, 56 A.D.2d 827, 393 N.Y.S.2d 29 (1st Dept. 1977), appeal denied, 42 N.Y.2d 810, 399 N.Y.S.2d 1025, 369 N.E.2d 774 (1977). Thus, in Greene v. Greene, 90 A.D.2d 533, 455 N.Y.S.2d 35 (2nd Dept. 1982), where the wife personally appeared before the foreign court, that appearance gave the foreign court personal jurisdiction over the wife and its decree was binding on her property and economic rights. Moreover, because the foreign decree did not contain any provision for alimony, the New York courts were powerless to add to such a provision.

An interesting twist was presented in Frantz v. Frantz, 92 A.D.2d 950, 460 N.Y.S.2d 668 (3rd Dept. 1983). In that case, it was the wife who obtained an ex parte default divorce in California, which decree provided for child support, spousal support, counsel fees and court costs. However, she did not leave the matter there; she then brought a New York proceeding in which she sought more child support, more maintenance, enforcement of the California decree in respect of counsel fees and costs, and equitable distribution. The husband moved for summary judgment asserting two inconsistent theories. First, he asserted that the California decree was not binding and enforceable as far as counsel fees and cost were concerned because California lacked personal jurisdiction over him. On the other hand, he also argued that the wife was collaterally estopped from seeking greater relief than that awarded her in California.

The Appellate Division held that the husband could assert inconsistent claims and the wife was, indeed, collaterally estopped from seeking greater maintenance and child support than what was provided in California, absent changed circumstances. The wife had a full opportunity to present her claims for support in California and the issue was the same as that presented in New York. While the wife claimed that there should be no estoppel because of lack of mutuality, the Appellate Division held that “mutuality of estoppel” was a “dead letter”. However, because the husband had, by the nature of his opposition, effectively waived his claim that the California court lacked personal jurisdiction, the Appellate Division held that the wife was able to enforce the counsel fee and costs provision of the California judgment in New York.
 
C236A:4: The Role of Fault

The second numbered clause of the fifth sentence of DRL § 236, Part A, subdivision 1 provides that an award of alimony may be made notwithstanding the parties continue to reside in the same abode and notwithstanding that the court refuses to grant the relief requested by either spouse “(2) by reason of the misconduct of the other spouse, unless such misconduct would itself constitute grounds for separation or divorce ....”

Prior to the enactment of the Equitable Distribution Law, former Section 236 provided that alimony could be awarded a wife notwithstanding her misconduct, unless that misconduct would itself constitute grounds for separation or divorce.

In gender-neutralizing the statute, the words “either spouse” have been substituted for “wife” at the end of phrase “notwithstanding that the court refuses to grant the relief requested by”. The words “other spouse” have replaced “wife” at the end of phrase “by reason of the misconduct of the” in clause (2).

While the legislative intent may have been only to gender-neutralize the statute, the use of the phrase “other spouse” in clause (2) has garbled the meaning of the statute. Taken literally, the revised statute provides that if the court denies matrimonial relief to the wife by reason of the conduct of the “other spouse”, i.e., the husband, the court may nevertheless award alimony unless the misconduct constituted grounds for divorce or separation. Such a construction makes no sense because the misconduct of the spouse from whom support is sought was never a bar to matrimonial or alimony relief for the spouse who wanted support; indeed, it was a basis for the matrimonial relief.

The use of the phrase “other spouse” in clause 2 may have been a drafting error. To gender-neutralize the statute, it would have been far clearer to use the words “his or her” instead of “other spouse”. If that had been done, the statute would have provided that alimony could be awarded even though matrimonial relief was denied to “either spouse” by reason of “his or her” misconduct, unless such misconduct would itself constitute grounds for separation or divorce.

Since a literal reading of the statute would render it nugatory, it would seem appropriate to construe the statute as providing that the failure of a spouse to obtain matrimonial relief because of his or her misconduct does not preclude the court from awarding alimony to that spouse, unless the misconduct would in itself constitute grounds for separation or divorce. This seems to have been the legislative intent. According to the Assembly memorandum in support of the legislation, the provisions of Part A, subdivision 1 were modified so as to make them gender-neutral and controlling in any actions commenced prior to the effective date of the bill. “This bill attempts to provide gender-neutral statutes that will survive judicial scrutiny as to constitutionality.” While the provisions of Part B pertaining to maintenance may have made substantive changes in the role of fault, the legislative record is barren of any intent to change the role of fault in cases brought before the effective date.

Under former Section 236, it was held that where a wife was guilty of misconduct which entitled the husband to a divorce, the wife was forever barred from entitlement to alimony. Math v. Math, 39 A.D.2d 583, 331 N.Y.S.2d 964 (2nd Dept. 1972), affirmed 31 N.Y.2d 693, 337 N.Y.S.2d 505, 289 N.E.2d 549 (1972). This was true even where both parties were awarded a divorce. Anonymous v. Anonymous, 57 A.D.2d 938, 395 N.Y.S.2d 103 (2nd Dept. 1977); Belandres v. Belandres, 58 A.D.2d 63, 395 N.Y.S.2d 458 (1st Dept. 1977). The husband could waive his statutory right to disentitle his wife but the wife’s rights would be limited to the extent of the waiver. Moran v. Moran, 81 A.D.2d 740, 438 N.Y.S.2d 421 (4th Dept. 1981); Vranick v. Vranick, 41 A.D.2d 663, 340 N.Y.S.2d 566 (2nd Dept. 1973) (wife withdrew her separation complaint and her reply to husband’s divorce counterclaim in consideration for three years of alimony payments; husband obtained fault divorce and wife was held bound to the three year alimony limitation).

Misconduct did not work an alimony disentitlement if the misconduct would not sustain the granting of a divorce to the other spouse. Thus, where both parties were guilty of misconduct and neither could obtain matrimonial relief, alimony could be awarded. Sacks v. Sacks, 26 A.D.2d 575, 271 N.Y.S.2d 358 (2nd Dept. 1966), appeal denied, 18 N.Y.2d 583, 276 N.Y.S.2d 1026 (1966); see alsoBasdekis v. Basdekis, 57 A.D.2d 567, 393 N.Y.S.2d 582 (2nd Dept. 1977) and Madderom v. Madderom, 44 A.D.2d 828, 355 N.Y.S.2d 24 (2nd Dept. 1974) (both implying that fault would not be an absolute bar to support pursuant to section 412 of the Family Court Act; the misconduct would be but one factor).

The way the courts responded to the problem was by tightening the standards by which the husband’s divorce grounds were to be judged, at least insofar as a divorce on cruelty grounds was concerned. In Hessen v. Hessen, 33 N.Y.2d 406, 353 N.Y.S.2d 421, 308 N.E.2d 891 (1974), the Court of Appeals ruled that, in addition to objective proof of physical or mental injury, the ages of the parties and the duration of the marriage, the effect that a finding of misconduct would have on the right to support “must continue to be an influential factor, as a matter of legislative interpretation ....” 33 N.Y.2d at 412, 353 N.Y.S.2d at 427. See also, Schenk v. Schenk, 86 A.D.2d 983, 448 N.Y.S.2d 320 (4th Dept. 1982), Bunce v. Bunce, 74 A.D.2d 711, 426 N.Y.S.2d 105 (3rd Dept. 1980), appeal denied, 51 N.Y.2d 704, 432 N.Y.S.2d 1028, 411 N.E.2d 798.

A similar rule seems to have been applied to the fault ground of adultery. In Westervelt v. Westervelt, 26 N.Y.2d 865, 309 N.Y.S.2d 604, 258 N.E.2d 98 (1970), affirming 32 A.D.2d 1048, 303 N.Y.S.2d 1013 (2nd Dept. 1969), the husband was denied an adultery divorce, despite the fact, as reflected in Judge Jasen’s dissenting opinion, that the wife lived with the co-respondent in his household for four months, appeared socially with him, and took contraceptives while living in his house.

Since the statute has been gender-neutralized, fault on the part of the husband would bar him from alimony. SeeWood v. Wood, 104 Misc.2d 109, 428 N.Y.S.2d 136 (Family Ct. Queens County 1980).

The rule barring alimony to a party guilty of misconduct was held, prior to Orr, to be constitutional. Rejected was the claim that distinguishing between the erring and the blameless was a denial of equal protection. It was held permissible to condition support upon freedom from marital blame. Fomenko v. Fomenko, 50 A.D.2d 712, 374 N.Y.S.2d 882 (4th Dept. 1975), appeal dismissed, 38 N.Y.2d 999, 384 N.Y.S.2d 440 (1976), appeal dismissed, 40 N.Y.2d 989, 390 N.Y.S.2d 1028 (1976).

Even in the wake of Orr, the promotion of marital harmony (by penalizing the errant) may be a sufficient important governmental objective to sustain the constitutionality of whatever vestiges of the absolute misconduct bar still linger in New York, after the Equitable Distribution Law.
 
C236A:5: Failure of Proof

The third numbered clause of the fifth sentence of DRL § 236, Part A, subdivision 1, provides that the court may award alimony even where the parties continue to live in the same abode and the court refuses to grant matrimonial relief to either spouse “(3) by reason of a failure of proof of the grounds of either spouse’s action or counterclaim.”

The statute has been gender-neutralized by the substitution of “either spouse” where “wife” appeared in former Section 236.

This provision was new to New York when Section 236 was initially enacted in 1962 and was designed to act as a means, in a proper case, of enforcing the general obligation of a spouse to support the other spouse. With the matrimonial action having failed, it may be preferable to determine support while the parties are still before the court rather than remitting the spouse seeking support to a new litigation in the Family Court. Brownstein v. Brownstein, 25 A.D.2d 205, 268 N.Y.S.2d 115 (1st Dept. 1966).

However, in Brownstein, it was held that where a wife insisted upon living apart from her husband despite the absence of fault (she having lost on that issue), and she had sufficient ability to provide for herself, the burden was on her to show that justice required that the husband be compelled to contribute to her separate lifestyle. In such an instance, the wife would not be deprived of support simply because she lost her case but because she preferred not to live up to her marital obligations and reside with her husband.

It bears noting that Brownstein was decided at a time when adultery was the only recognized ground for divorce in New York. Now, the existence of additional fault grounds increases the possibilities that one or both parties might prove a fault ground. Even if the proof failed, the refusal of one party to resume marital cohabitation without justification may constitute an abandonment and that abandonment would act, under a Part A case, as a bar to support.

There was no bar to an award of alimony where the husband lost an annulment action. SeeRosenstiel v. Rosenstiel, 28 A.D.2d 651, 280 N.Y.S.2d 624 (1st Dept. 1967), affirmed 20 N.Y.2d 925, 286 N.Y.S.2d 278, 233 N.E.2d 292 (1967), reargument denied 21 N.Y.2d 880, 289 N.Y.S.2d 1029, 236 N.E.2d 500.

It has been held that where the wife sued for a separation and the husband counterclaimed to declare their marriage void (on the ground that a prior divorce was invalid), the wife could be awarded alimony even though the husband prevailed on his counterclaim. This was so because the husband’s counterclaim for a declaration of nullity was an action within Section 236 and failure of the wife to prove her separation case was not a bar. Zeitlan v. Zeitlan, 31 A.D.2d 955, 298 N.Y.S.2d 816 (2nd Dept. 1969), affirmed 26 N.Y.2d 835, 309 N.Y.S.2d 585 (1970), reargument denied 27 N.Y.2d 670, 313 N.Y.S.2d 1027, 261 N.E.2d 913.

In Marum v. Marum, 8 A.D.2d 975, 190 N.Y.S.2d 812 (2nd Dept. 1959) the wife lost her separation action because the husband’s prior divorce was invalid but the husband had not formally counterclaimed for a declaration of nullity. Since the husband had only raised the invalid divorce as a defense, the wife was held barred from an award of alimony.

On the other hand, where a husband sued to declare his marriage to his wife void because her prior divorce was invalid and the court dismissed the husband’s complaint, the wife was awarded alimony though she had not counterclaimed. “[I]f alimony may be awarded to the wife upon failure of proof of her action or counterclaim, the court should likewise have the power to award alimony where there is no counterclaim.” Virgil v. Virgil, 55 Misc.2d 64, 284 N.Y.S.2d 568, 572 (Sup.Ct. N.Y. County 1967).

It should be emphasized that this aspect of the statute relates only to a mere failure of proof; if the action has failed because of misconduct that would entitle the other spouse to a divorce or separation, different rules and a different result would obtain.
 
C236A:6: Alimony Standards and Criteria

Having reviewed the requirements for qualifying for an alimony award, consideration is given to the standards by which the court determined whether the finances of the parties are such that one spouse should be awarded alimony and, if so, the amount of the award.

The first sentence of DRL § 236, Part A, subdivision 1, provides that the court “may direct either spouse to provide suitably for the support of the other as, in the court’s discretion, justice requires, having regard to the length of time of the marriage, the ability of each spouse to be self supporting, the circumstances of the case and of the respective parties.”

The court was given discretion in making an alimony determination. The discretion is not boundless and an award which is too generous or too restrictive would be subject to reversal or modification on appeal as an “abuse” of discretion. However, within the undefinable legal limits this side of an “abuse”, the court’s hands are free. Moreover, the Appellate Divisions, as branches of the Supreme Court, have a considerably greater leeway to set aside or modify an award found to be too low or too high than does the Court of Appeals. To warrant the intervention of the Court of Appeals, there must be an underlying question of law or the award must be so “gross” or “outrageous” as to shock the conscience. SeePatron v. Patron, 40 N.Y.2d 582, 388 N.Y.S.2d 890, 357 N.E.2d 361 (1976); Kover v. Kover, 29 N.Y.2d 408, 328 N.Y.S.2d 641, 278 N.E.2d 886 (1972).

Discretion does not mean freedom to abstractly pick a number; the courts have identified a number of factors which must be considered in fixing alimony. These factors include the financial resources of the parties, the age and health of the parties, the marital standard of living and the station of the parties in life, and to some extent the conduct of the parties. Kover v. Kover, supra; Phillips v. Phillips, 1 A.D.2d 393, 150 N.Y.S.2d 646 (1st Dept. 1956), affirmed, 2 N.Y.2d 742, 157 N.Y.S.2d 378, 138 N.E.2d 738 (1956). The court considered the tax consequences of the alimony awarded, including whether payments are deductible by the paying spouse and taxable to the recipient spouse. Marshall v. Marshall, 48 A.D.2d 759, 368 N.Y.S.2d 360 (4th Dept. 1975).

The ability of the spouse who wants support to provide for his or her self was an important factor. In 1968, when alimony was available only to wives, former Section 236 was amended to require the court to consider the ability of the wife to be self supporting; in Kover, the amendment was regarded as a legislative confirmation of a judicial trend toward considering the wife’s own resources. With the gender-neutralizing of the statute, consideration of the parties’ respective abilities to be self supporting is relevant to both the ability of each to provide for themselves and to the ability of each to provide for the other.

The courts focused upon the problem of the home-making spouse, typically the wife, who, upon divorce proceedings, the other spouse contends should go out to the job market and provide for his or her own support. In Kay v. Kay, 37 N.Y.2d 632, 376 N.Y.S.2d 443, 339 N.E.2d 143 (1975), the Court of Appeals, while noting the trend to a more equitable division of economic responsibility between men and women, refused to penalize a wife who remained at home to raise children. Although the wife was college educated and was relatively young in age, she had been out of the job market for most of her adult life, spending her time caring for the children and the home. It was held that where the husband had acquiesced and benefited from his spouse’s role as wife and mother for many years, he could not, for his economic reasons, force her into a different role without demonstrating that it has “economic viability” and the children would not suffer. See alsoBeesemyer v. Beesemyer, 88 A.D.2d 873, 451 N.Y.S.2d 774 (1st Dept. 1982), appeal dismissed, 57 N.Y.2d 805, 455 N.Y.S.2d 597, 441 N.E.2d 1115; Kosovich v. Kosovich, 82 A.D.2d 744, 440 N.Y.2d 6 (1st Dept. 1981), appeal dismissed, 54 N.Y.2d 903, 445 N.Y.S.2d 149, 429 N.E.2d 828, (1981); Perry v. Perry, 84 A.D.2d 612, 444 N.Y.S.2d 490 (3rd Dept. 1981).

On the other hand, where the wife did have a career outside the home and a resulting ability to support herself, the result was different. SeeOkpaku v. Okpaku, 45 A.D.2d 951, 359 N.Y.S.2d 310 (1st Dept. 1974), appeal dismissed, 35 N.Y.2d 820, 362 N.Y.S.2d 465, 321 N.E.2d 554 (1975), appeal dismissed, 35 N.Y.2d 644, 362 N.Y.S.2d 1026, 321 N.E.2d 555.

Under the predecessor to Part A, a wife was penalized if she sought to upgrade her economic skills and status. In Morgan v. Morgan, 81 Misc.2d 616, 366 N.Y.S.2d 977 (Sup.Ct. N.Y. County 1975), reversed, 52 A.D.2d 804, 383 N.Y.S.2d 343 (1st Dept. 1976), appeal dismissed, 40 N.Y.2d 843, 387 N.Y.S.2d 389 (1976), the wife, a biology student, took up full-time employment as a secretary and data analyst in order to finance her husband’s law school education. Upon divorce, although she was self supporting, she sought support to enable her to complete training to be a physician. The trial court granted her relief, holding that it be unfair to relegate the wife to life of being a “well-paid, skilled technician” and frustrate her life-long desire to be a doctor, a desire she put aside to be a wife and mother. The Appellate Division reversed, holding that re-training of the wife was not contemplated by the parties during the marriage and an award had to be predicated upon present circumstances. Since the wife had the capacity to support herself, her potential earnings were to be “imputed” or deducted from the amount that would otherwise have been paid by the husband. See alsoFinder v. Finder, 65 A.D.2d 536, 409 N.Y.S.2d 406 (1st Dept. 1978); appeal dismissed 46 N.Y.2d 867, 414 N.Y.S.2d 516, 387 N.E.2d 227, reargument denied 46 N.Y.1076, 416 N.Y.S.2d 1029, 390 N.E.2d 318 (1979); Matter of R. v. R., 98 Misc.2d 580, 414 N.Y.S.2d 846 (Family Ct. N.Y. County 1979).

A different situation was presented where the needy spouse is highly qualified but chooses, for personal reasons, to work at a job which is beneath his or her educational or experience level. In such a case, the needy spouse’s ability to earn more would be imputed and would reduce the amount of alimony. Shanahan v. Shanahan, 80 A.D.2d 738, 437 N.Y.S.2d 169 (4th Dept. 1981). If there are valid reasons which have prevented the needy spouse from working up to the attained level of education and training, such as need to be home with children, or lack of better or more lucrative employment, no “imputation” should be made.

Another area in controversy was the weight to be given to the pre-separation standard of living. In Kay, supra, the Court of Appeals ruled that while a wife has “no absolute right to a share of her husband’s resources as such”, it is the “marital standard of living, assuming the husband is financially able to maintain it, that provides the standard for permanent alimony payments.” 37 N.Y.2d at 635, 376 N.Y.S.2d at 446. Instances where the pre-separation standard of living is of less weight are cases in which the husband has had genuine financial reversals or in which the pre-separation standard was funded by the invasion of capital assets and was otherwise beyond the means of the parties. 37 N.Y.2d at 636-647, 376 N.Y.S.2d at 446-447.

In Hickland v. Hickland, 39 N.Y.2d 1, 382 N.Y.S.2d 475, 346 N.E.2d 243 (1976), cert. denied, 97 S.Ct. 357, 429 U.S. 941, 50 L.Ed.2d 310 (1976), it was held that unless the husband could demonstrate that his lack of income was unavoidable or was the result of a plan to which the wife consented and which became irrevocable, he is obligated by law to use his assets and earning power to maintain the former marital standard of living. InBrettschneider v. Brettschneider, 113 Misc.2d 861, 449 N.Y.S.2d 912 (Sup.Ct. N.Y. County 1982), the court found that the wife, during the marriage and with the husband’s encouragement, resigned from her employment. She obtained less remunerative employment after he left her. In addition, the court concluded that the husband had accustomed the wife to a relatively expensive way of life. In making an alimony award, the court fixed an amount of income that the wife reasonably required and directed the husband to pay the amount of alimony which, when added to the wife’s employment income, equalled her reasonable income requirements.

The income and assets of the spouse from whom support is sought were also highly relevant to an alimony determination. In considering this factor, the court was not bound by what the support-resisting spouse claimed his other income and assets are. The court could properly look to the objective facts, including the support-resisting party’s lifestyle, investments or acquisitions, management and control over income and assets, the value of employment-generated fringe benefits, and the party’s earnings potential. SeeWilliamson v. Williamson, 84 A.D.2d 606, 444 N.Y.S.2d 487 (3rd Dept. 1981), appeal denied 55 N.Y.2d 604, 447 N.Y.S.2d 1026, 432 N.E.2d 142.

If alimony is awarded, however, the award could not be so prohibitive as to strip the payor spouse of income and assets needed to meet his or her own reasonable expenses. The supporting spouse was entitled to have his or her reasonable needs considered and to be left with sufficient resources to meet those needs. Colabella v. Colabella, 86 A.D.2d 643, 447 N.Y.S.2d 26 (2nd Dept. 1982).
 
C236A:7: Commencement, Duration and Termination of Alimony

At one time, DRL § 236, Part A, subdivision 1, like its predecessor, made no express provision for when alimony may be held to commence, for how long alimony may last, and for when alimony may be terminated. While there are some statutes which mandate termination of alimony in certain instances, most of the rules are judge-made.

With regard to temporary alimony, the general rule was that an award may be made retroactive to the time of the application for temporary alimony but no earlier. E.g., Brody v. Brody, 3 A.D.2d 992, 163 N.Y.S.2d 26 (1st Dept. 1957),reargument denied 3 A.D.2d 1015, 165 N.Y.S.2d 448; Edwards v. Edwards, 69 Misc.2d 1052, 332 N.Y.S.2d 295 (Sup.Ct. Nassau County 1972). Thus, if an action was brought and the spouse seeking support let some time pass before making a motion for a temporary award, an award would generally not cover the period prior to the making of the motion. While in some cases it was been said that the supported spouse is “presumed” to have been suitably provided for prior to the motion, seeLewis v. Lewis, 22 A.D.2d 860, 254 N.Y.S.2d 188 (1st Dept. 1964), a stronger basis for the rule was that to grant relief for obligations incurred prior to the making of the motion would in effect grant summary judgment on matters which relate to past, not present, support (in effect a “necessaries” claim).

There were holdings which indicated that the court has the power, in appropriate cases, to award relief effective as of the date that a notice of motion for temporary relief was served or as of the date that an order to show cause bringing on such a motion was issued. Palmblad v. Palmblad, 48 Misc.2d 177, 264 N.Y.S.2d 337 (Sup.Ct. N.Y. County 1965); Polokoff v. Polokoff, 34 Misc.2d 414, 226 N.Y.S.2d 597 (Sup.Ct. Queens County 1962).

The statute now explicitly mandates that any temporary or permanent award be made effective as of the date of the application.

An award of temporary alimony terminates when the action in which it was awarded terminates. Once a judgment on the merits is entered, it is too late to enforce a temporary award. Mittman v. Mittman, 263 App.Div. 384, 33 N.Y.S.2d 211 (1st Dept. 1942); Aronson v. Aronson, 29 A.D.2d 732, 286 N.Y.S.2d 628 (4th Dept. 1968). In addition to termination after judgment on the merits, a temporary alimony order falls whenever and however the action is resolved, including settlement, abandonment, discontinuance or dismissal. Senf v. Senf, 39 Misc.2d 1061, 242 N.Y.S.2d 343 (Sup.Ct. Erie County 1963) (Jasen, J.).

In so far as termination of permanent alimony is concerned, unless the parties agree otherwise, permanent alimony terminates upon the death of either spouse or upon remarriage of the supported spouse, which ever first occurs. Gandelman v. Gandelman, 39 A.D.2d 727, 331 N.Y.S.2d 977 (2nd Dept. 1972); see Chiarmonte v. Chiarmonte, 106 Misc.2d 822, 435 N.Y.S.2d 523 (Sup.Ct. Nassau County 1981).

DRL § 248 mandates that, upon the “husband’s” application and proof of the “wife’s” re-marriage, the court “must” annul any alimony directive. InGaines v. Jacobsen, 308 N.Y. 218 (1954), the Court of Appeals, overruling prior precedent, held that an annulment of the remarriage does not revive the first husband’s obligations. The court in Gaines relied upon the amendment to the predecessor statute which made it possible for the wife to obtain support from her second husband within the confines of an annulment or declaration of nullity action. However, if the annulment was procured in another state of foreign jurisdiction which does not allow for alimony awards to be made in annulment actions, the wife may be unable to obtain support from either the first or the second husband if Gaines is followed in that situation. Since Gaines drew heavily upon the availability of relief from the second husband and if that relief is not available Gaines should be inapplicable, at least where the wife is a New Yorker and did not voluntarily choose to litigate the annulment in the foreign jurisdiction.

DRL § 248 also gives the court discretion to annul an alimony direction upon proof that the “wife” is “habitually living with another man” and is “holding herself out as his wife”, though they are not married.

DRL § 248 is not self-executing; an application to the court and proof of the ground is required. For discussion of the “habitually living” and “holding out” rule, seeNorthrup v. Northrup, 43 N.Y.2d 566, 402 N.Y.S.2d 997, 373 N.E.2d 1221 (1978).

While DRL § 248 has not been amended so as to make it gender neutral, at least one court has judicially construed the statute to be applicable to men who receive or want to receive alimony. SeeMatter of Wood v. Wood, 104 Misc.2d 109, 428 N.Y.S.2d 136 (Family Court Queens County 1980).

In addition to termination, there are a number of statutory provisions which either suspend alimony payments or authorize the court to suspend payments in certain situations. See DRL § 241 (denial of visitation rights); DRL § 247 (payments suspended while defaulting spouse in jail for contempt).

Since permanent alimony ceases on the happening of certain contingencies, alimony continues for an indefinite period of time until one of the contingencies occurs or until the alimony provision is vacated or modified by the Court.
 
C236A:8: Modification

The last three sentences of DRL § 236, Part A, subdivision 1, relate to the power of the court to annul or modify any prior alimony award. Any modification application made in a case commenced prior to July 19, 1980 is to be controlled by the Part A provisions. (See Part B, subd. 2.)

The seventh sentence of the statute provides that either spouse, by order to show cause, may apply to the court for the annulment or modification of any alimony direction, whether given by final judgment or by order.

To obtain a modification, either upward or downward, it is generally necessary for the moving party to show a substantial change in circumstances since the entry of the order or judgment sought to be modified.

An alimony direction may be modified downward if the supporting spouse’s ability to pay declines or if the means of the supported spouse increase. Rockwell v. Rockwell, 67 A.D.2d 892, 414 N.Y.S.2d 130 (1st Dept. 1979). A change of employment by the supporting spouse, which reduces income and means, must be bona fide in order to form the basis of a modification; a self-created hardship to avoid support obligations will not do. SeeAndre v. Andre, 78 A.D.2d 974, 433 N.Y.S.2d 678 (4th Dept. 1980).

Alimony may be increased where there has been a substantial change in the circumstances of the supported spouse. Such changes may include illness, loss of employment or other legitimate hardships. However, the fact that the supporting spouse’s income and means may have increased does not, by itself, justify an increase in alimony. E.g., Ward v. Ward, 79 A.D.2d 683, 433 N.Y.S.2d 861 (2nd Dept. 1980), appeal denied, 52 N.Y.2d 705, 437 N.Y.S.2d 1029, 419 N.E.2d 876 (but see discussion below of new ninth sentence of statute).

The standards are even more exacting when a spouse seeks to modify a temporary alimony direction. The courts do not favor numerous inconclusive interim applications; the more appropriate remedy, it is said, is to press for a prompt trial at which the issue of finances can be fully aired. Nonetheless, if the change of circumstances is serious enough, modification of the temporary order may be made. Watras v. Watras, 43 A.D.2d 520, 349 N.Y.S.2d 79 (1st Dept. 1973). (See also discussion below of the new ninth sentence added to Part A, subdivision 1.)

The eighth sentence of the statute deals with the power of the courts to modify or annul arrears. For discussion of that issue see the commentary to DRL § 244.

In 1980, the Legislature added what is now the ninth and last sentence in Part A, subdivision 1 providing that a modification “may increase such support nunc pro tunc based on newly discovered evidence.” (L.1980, c. 645, § 2.) The key words here are “newly discovered evidence”. Seemingly, this would be evidence which existed at the time of the proceedings which led to the alimony award but which was unknown and was unavailable to the spouse. The evidence should be such that had it been presented at the time the alimony award was made, the support award would have been higher. If that is the case, the statute now permits the award to be increased retroactively to the date of the original award and to the amount that would have been awarded had the evidence been available.

The role of discovery may have an effect in determining whether relief under the new ninth sentence should be granted. If it turns out that the supported spouse attempted to obtain discovery which would have led to the hidden income or asset and the supporting spouse intentionally, or unintentionally, failed to give an accurate response, relief should be available. The same would be true if no discovery was sought but the income or asset was not disclosed in affidavits made by the supporting spouse and which were relied upon by the supported spouse. However, there may be circumstances in which the supported spouse failed to make appropriate inquiry which would have led to discovery of the evidence now discovered and that fact may warrant denial of retroactive relief.

The ninth sentence would seem to apply to temporary alimony awards as well as permanent alimony awards. Suppose, in the affidavits submitted on the motion for temporary alimony, the supporting spouse neglects to mention income or assets, and the other spouse finds out about them in the course of discovery. The amendment would permit the supported spouse to apply for a retroactive increase in temporary alimony. This might cut against the judicial policy, above-noted, against modification of temporary awards. However, such policy should be adjusted to accord to the legislative policy in favor of awards being made upon all the relevant facts.

The amendment speaks of “newly discovered evidence”. This would contemplate evidence which existed at the time of the original award and which was unknown to the supported party. If the evidence relates to facts which arose after the award was made, the evidence would seem to be outside the scope of the amendment. Such evidence could still form the basis of an application to increase the award on the ground of substantial change in circumstances, but such a modification, if granted, would not ordinarily be retroactive to the date of the original award.

Laches has been recognized as a defense to an application to increase an alimony award. SeeMeyer v. Meyer, 74 A.D.2d 945, 426 N.Y.S.2d 320 (3rd Dept. 1980), appeal dismissed, 50 N.Y.2d 1056, 431 N.Y.S.2d 817, 410 N.E.2d 750 (1980). If the supported spouse uncovers the newly discovered evidence and fails to promptly seek relief under the ninth sentence, the court may refuse to give any increase retroactive effect. Under such circumstances, where the supported spouse has the requisite knowledge but fails to act upon it, it may be unfair to saddle the supporting spouse with having to pay additional support for the period of the delay.

It should be noted that, where one party seeks a conversion divorce on the basis of compliance with a separation judgment, the court may consider the issue of alimony and child support de novo; it is not a modification situation. Blauner v. Blauner, 60 A.D.2d 215, 400 N.Y.S.2d 335 (1st Dept. 1977), motion for leave to appeal denied, 44 N.Y.2d 648, 408 N.Y.S.2d 1023, 380 N.E.2d 336 (1978). However, it has been also held that temporary alimony may not be awarded in such an action; until a divorce judgment is entered (which fixes alimony de novo), the supported spouse must rely upon the support provided in the separation judgment or seek a modification of that judgment in the separation action. Sterlace v. Sterlace, 63 A.D.2d 450, 406 N.Y.S.2d 934 (4th Dept. 1978).

Can the court provide that its alimony award is to be increased or decreased in the future automatically, without the necessity for a modification application? The answer, under Part A, subdivision 1, seems to be no. In Provenzano v. Provenzano, 71 A.D.2d 618, 418 N.Y.S.2d 140 (2nd Dept. 1979), it was held that error to provide for an automatic escalator clause keyed to the husband’s earnings on the ground that a judgment must speak as of its date on the facts then existing. Similarly, in Sterlace v. Sterlace, 52 A.D.2d 743, 382 N.Y.S.2d 191 (4th Dept. 1976), it was held error to provide that alimony would be eliminated after one year since the issue of whether changed circumstances would warrant elimination or reduction of alimony should not be decided at the time of judgment. The Court of Appeals has declined to rule on whether this rule is absolute. In Tumolillo v. Tumolillo, 71 A.D.2d 625, 418 N.Y.S.2d 150 (2nd Dept. 1979), the Appellate Division struck out a provision for termination of alimony after two years on the ground that there was no basis in the record for such action. The Appellate Division ruled that the question of whether there might be a change of circumstances should not then have been decided. The Court of Appeals affirmed on the basis of the record, noting that the Appellate Division did not rule as a matter of law that a future termination is always beyond the power of the court, and refusing to rule on the correctness of that proposition. 51 N.Y.2d 790, 433 N.Y.S.2d 89, 412 N.E.2d 1315 (1980). The Court of Appeals decision came several months after the passage of the Equitable Distribution Law and the Court may have had its eye on the concept of limited maintenance now contained in Part B. (Part B, § 1(a)). However, under Part A, the cases consistently indicate that the court may not, in its judgment, provide for modifications which take place automatically in the future. The parties can, and often do, provide for such automatic modification in a separate agreement.

This discussion has focused upon alimony awarded by the court on a non-consensual basis. Where the parties have entered into a separation agreement and the court’s alimony award is predicated upon what the parties have agreed to, some other considerations obtain. If the agreement of the parties merged or was intended to merge in the judgment, the court may modify the agreement upward or downward as if there had been no agreement ever. SeeWlodarek v. Wlodarek, 78 A.D.2d 981, 433 N.Y.S.2d 672 (4th Dept. 1980); Hedaya v. Hedaya, 68 Misc.2d 165, 327 N.Y.S.2d 720 (Sup.Ct. Kings County 1969). If the agreement did not merge, support may be increased by the court if the supported spouse is unable to support herself or himself and is in actual danger of becoming a public charge but only to that extent. McMains v. McMains, 15 N.Y.2d 283, 258 N.Y.S.2d 93, 206 N.E.2d 185 (1965); Raines v. Raines, 80 A.D.2d 721, 437 N.Y.S.2d 140 (4th Dept. 1981). Where an agreement did not merge in the judgment and the supporting spouse’s financial condition has worsened, the court may modify the judgment downward but such modification would still leave the supported spouse with the right to pursue an action for breach of contract. Goldman v. Goldman, 282 N.Y. 296 (1940); King v. Schultz, 29 N.Y.2d 718, 325 N.Y.S.2d 754, 275 N.E.2d 336 (1971). Even though the supported spouse may have a contract claim, a downward modification is meaningful since it would at least protect the supporting spouse from the full panoply of enforcement devices which stand behind the alimony decree. SeeBuchman v. Buchman, 61 A.D.2d 973, 402 N.Y.S.2d 613 (2nd Dept. 1978). Further, the courts, while recognizing the right of the supported spouse to maintain and prevail upon a breach of contract action, have attempted to achieve a measure of justice by restricting the supported spouse’s ability to collect more than the downwardly modified support. In Mackey v. Mackey, 58 A.D.2d 806, 396 N.Y.S.2d 257 (2nd Dept. 1977), the court provided that its award of alimony and child support (reduced in favor of the husband) would be further reduced to the extent of any monies received by the wife as a result of income executions issued to enforce arrears under the separation agreement. If the husband was so impoverished as not to have any property, income execution might be the only means open to the wife to collect any breach of contract judgment.

As will be discussed in C236B:45, infra, the Legislature, in the Equitable Distribution Law, has attempted to address the problem in a different way with respect to agreements executed on or after July 19, 1980. See Part B, § 9(b).

Part B
 
C236B:1: The Equitable Distribution Effective Date

The Legislature, in enacting the Equitable Distribution Law, determined to incorporate and preserve the provisions of existing alimony law in Part A of new Section 236 and placed the new reforming provisions of maintenance, property distribution and support into Part B.

In the first paragraph to new Section 236, which appears before the statute is split in two and which is entitled “special controlling provisions”, the Legislature provided a general formula for determining whether a given action or proceeding is to be controlled by Part A or by Part B. Except as expressly provided to the contrary, Part A is to control any action or proceeding commenced prior to the date on which new Section 236 became effective; Part B is to control in any action or proceeding commenced on or after the effective date.

There are two key phrases in the “special controlling provisions” paragraph: “commenced” and “effective date”. At the time that the Equitable Distribution Law was adopted in 1980, matrimonial actions, like civil actions generally, were commenced by the service of a summons with notice or by the service of a summons and verified complaint. However, since 1992, matrimonial actions, like all other civil actions, are commenced by filing a summons with notice or a summons and verified complaint. DRL § 211.

The “effective date” of the present Section 236, as with the Equitable Distribution Law generally, is July 19, 1980. The Law was passed by the Legislature on June 3, 1980 and was signed by the Governor on June 19, 1980. Section 47 of the Law (L.1980, c. 281) provided that the bill is to take effect on the 30th day “next succeeding the date on which it shall have become a law.” Since the bill was signed by the Governor on June 19, 1980, the Equitable Distribution Law became effective on July 19, 1980.

Under the “special controlling provisions”, Part A is supposed to control in any action in which a summons was properly served on or before July 18, 1980 and Part B is supposed to control in any action which was commenced on or after July 19, 1980. The Assembly Memorandum in Support of the Equitable Distribution Law plainly confirms, in several places, the legislative intent to have Part A control in cases commenced prior to the effective date and to have Part B control in cases commenced on or after the effective date.

One result of the “special controlling provisions” was to turn Part A into a statutory dinosaur. When the clock reached midnight on the morning of July 19, 1980, it was too late to commence an action to which the old law alimony and title principles would apply. Whatever Part A cases could be commenced have been commenced and as each Part A case made its way through the courthouse and to judgment, Part A moved closer and closer to extinction. As a practical matter, the only remaining viability to Part A are modifications of alimony in any old law action, which modifications continue to be controlled by Part A.

The Legislature decided to measure the applicability of Part A and Part B from the date an action was commenced because it intended that Part A should continue to apply to cases that were pending before the change in the law, in addition to those cases that had previously been concluded by judgment under the old law. As to pending cases, there was concern that it would be unfair, where the case had been brought with knowledge that the old law would apply, and the case had been prepared and litigated (to whatever extent) on that basis, to change the rules of law in mid-stream.

Once it was determined that Part A would continue to apply to pending cases, the date the action was commenced became the most obvious and workable cut-off date. However, the Legislature, by delaying the effective date for 30 days after enactment, permitted litigants to try to make service within the 30 day period in order to “beat” the applicability of Part B. There were spouses who took “vacations” in that 30 day period to avoid application of Part A. And if service was made in the 30 day period, the defendant spouse often was not willing to accept the application of Part A without a fight.

Defendant spouses proceeded, after July 19, 1980 to start their own cases to which, they would argue, Part B should apply. Nor were parties in cases which had been pending for some time content to resign themselves to the application of Part A. Plaintiffs, or counterclaiming defendants, in cases pending before July 19, 1980 looked for ways to drop or discontinue their causes of action so that a new action might be commenced after the effective date of Part B.

The courts sorted the issues out of a variety of procedural thickets, accommodating both the legislative intent as to the effective date of Part B and the procedural rules set out in the CPLR concerning service of process, into position of counterclaims, discontinuances and consolidation and joint trial.

In Tucker v. Tucker, 55 N.Y.2d 378, 449 N.Y.S.2d 683, 434 N.E.2d 1050 (1982), the Court unanimously held that a plaintiff who commenced a matrimonial action prior to the July 19, 1980 effective date of Part B could not be allowed to discontinue that action for the purpose of bringing a post-July 19, 1980 action in order to take advantage of the more liberal economic provisions of Part B. The Court stated that discontinuance had to be denied, as a matter of law, in order to prevent frustration of the legislative determination as to which actions are to be controlled by which of the two parts of the statute.

The defendant husband in Tucker had not counterclaimed for divorce in the Part A action. In response to the wife’s motion to discontinue, he sought leave to amend his answer to add a divorce counterclaim. While the Appellate Division directed that the amendment be permitted only if the husband stipulated that the wife’s rights would not be affected if she was found guilty of misconduct, the Court of Appeals struck the condition. The Court of Appeals ruled that the husband could not be required to consent to a deviation from the substantive statutory provisions which, by express legislative fiat, applied to the action.

Tucker involved a plaintiff who openly conceded that she wanted to discontinue her prior action in order to commence an action on the same facts solely to obtain Part B treatment. In Knobel v. Knobel, 95 A.D.2d 845, 464 N.Y.S.2d 380 (2nd Dept. 1983), the Appellate Division allowed a wife to discontinue her matrimonial action, with prejudice to any allegations of misconduct which could have been the basis for matrimonial relief prior to the entry of the lower court’s order on her discontinuance motion. Although the husband claimed that the wife’s true purpose was to sue again, with Part B to apply, the Court of Appeals held that allowance of the discontinuance was not improper and sustained it. 60 N.Y.2d 672, 468 N.Y.S.2d 102, 455 N.E.2d 661 (1983).

However, if the original pre-July 19, 1980 action was not within Part A anyway, Tucker did not preclude discontinuance in favor of a post-July 19, 1980 action that does fall within Part B. In Felt v. Felt, 93 A.D.2d 396, 461 N.Y.S.2d 835 (1st Dept. 1983), affirmed 62 N.Y.2d 691, 476 N.Y.S.2d 537, 465 N.E.2d 44 (1984), the plaintiff brought an action in 1978 seeking a declaration that a prior Dominican Republic divorce decree was null and void and that she, not another woman, was the lawful wife of the defendant. In November 1981, the plaintiff sought to discontinue her action so that she might bring a divorce action against the defendant as to which Part B would apply. It was concluded that since the plaintiff’s action was not subject to Part A, the considerations underlying Tucker and related cases did not apply and discontinuance could be allowed.

On the same day as it decided Tucker, the Court of Appeals also decided Valladares v. Valladares, 55 N.Y.2d 388, 449 N.Y.S.2d 687, 434 N.E.2d 687 (1982). In that case, the husband had commenced a divorce action under Part A and the wife, after July 19, 1980, moved for permission to amend her answer to include both a divorce counterclaim and a demand for equitable distribution. She argued that Part B should be applied to her counterclaim since it was interposed when her amended answer was served after July 19, 1980. The Court of Appeals held that Part B would not apply to her counterclaim because the critical date is not the date that her claim was interposed but the date “when the action in which it was interposed was commenced.” 449 N.Y.S.2d at 689.

Subsequently, in Motler v. Motler, 60 N.Y.2d 244, 469 N.Y.S.2d 586, 457 N.E.2d 691 (1983), the Court of Appeals agreed that, as counterclaims in New York are permissive, it was proper for a defendant in a matrimonial action commenced before July 19, 1980 to commence an independent matrimonial action or after that date so as to attempt Part B treatment. Indeed, in Motler it was further held that where an action subject to Part A is commenced, and after July 19, 1980, the defendant interposes a counterclaim therein, it is permissible to allow the defendant to discontinue the counterclaim so that the same allegations can be presented in an independent action to which Part B would apply.
 
C236B:2: The Constitutionality of Retroactive Effect of the Equitable Distribution Law

Even though the Legislature has generally provided that the provisions of Part B are not to be applied to cases commenced prior to the July 19, 1980 effective date, the Equitable Distribution Law does pull within its reach property which was acquired prior to the effective date. In a divorce action commenced on or after July 19, 1980, property acquired before that date may be subject to equitable distribution. It was contended that, in affecting property acquired prior to the effective date, the Legislature has violated due process by interfering with vested property rights and has impaired contractual rights. In Valladares v. Valladares, 80 A.D.2d 244, 438 N.Y.S.2d 810 (2nd Dept. 1981), modified on other grounds, 55 N.Y.2d 378, 449 N.Y.S.2d 683, 434 N.E.2d 1050 (1982), these contentions were rejected and the statute held constitutional.
 
C236B:3: Actions Subject to the Equitable Distribution Law

DRL § 236, Part B, subdivision 2, sets forth a list of the types of actions which generally are covered by Part B. Consistent with prior law under Part A, Part B applies to actions to annul a marriage, to declare the nullity of a void marriage, for a separation and for divorce. With respect to separation actions, however, it must be noted that, pursuant to Part B, subdivision 5, separation actions are excluded from the equitable distribution aspects of Part B.

Part B, subdivision 2, expanding on prior law, adds coverage for actions which seek “dissolution” of a marriage. Such dissolution may be obtained on the ground of absence (DRL, Article 12) and, perhaps because of the relatively few cases in which five-year’s absence is a factor, was not expressly included in former section 236 nor is it now included in Part A. The practical significance of this inclusion to Part B may be limited since, to obtain dissolution, the plaintiff spouse must believe that the absent spouse is dead and death of the other spouse would change the nature and extent of the plaintiff spouse’s economic rights. It is possible that the Legislature intended the word “dissolution” to encompass all types of actions which have as their object the termination of a marriage but the specific listing of actions would make a broad use of “dissolution” redundant.

Part B is expressly applicable to actions “for a declaration of the validity or nullity of a foreign judgment of divorce”. Under prior law, it was held that such actions did not qualify as actions in which alimony can be awarded. SeeFelt v. Felt, 93 A.D.2d 396, 461 N.Y.S.2d 835 (1st Dept. 1983), affirmed, 62 N.Y.2d 691, 476 N.Y.S.2d 537, 465 N.E.2d 44 (1984).

This change was the subject of extensive treatment in Lavi v. Lavi, 103 A.D.2d 400, 480 N.Y.S.2d 338 (2nd Dept. 1984). In that case, it was alleged by a wife that she was duped or defrauded into initiating a Mexican divorce proceeding which resulted in a bilateral decree granted in 1969. The parties had been married less than a year before the Mexican divorce was entered and, following their return to New York from Mexico, the parties cohabited together as husband and wife for a period of nearly 10 years and had a child together. The wife, in a New York action brought in 1983, sought an award of temporary maintenance. The Appellate Division upheld the granting of the relief requested, on the ground that the existence of a foreign divorce decree was not a bar to temporary maintenance. Maintenance and temporary maintenance are types of relief that the equitable distribution provisions of Part B of section 236 of the Domestic Relations Law make available. Subdivision 2 of Part B generally makes actions for declaratory relief in respect to foreign divorce decrees subject to those Equitable Distribution Law provisions. In theLavi case, the plaintiff asserted divorce claims as well as a claim to declare the nullity of the Mexican divorce and to declare the validity of the parties’ marriage. The presence of the claim addressed to the validity of the Mexican decree was sufficient to bring her action within the general ambit of the Equitable Distribution Law. Moreover, the Lavi court held that relief was not precluded on the ground that the Mexican decree had been obtained prior to the June 19, 1980 effective date of the Equitable Distribution Law. While subdivision 2 limits its coverage to designated actions (including the declaratory judgment action directed at a foreign divorce decree) commenced on and after the statutory effective date of July 19, 1980, the action referred to is the New York action at issue. Hence, the controlling date was the date that the plaintiff brought the New York declaratory judgment action, not the date on which the Mexican action was commenced or the date the judgment was entered in the Mexican action. The court explained that its construction of subdivision 2 merely allowed the plaintiff, should she succeed in attacking the divorce, to be placed in the same position that she would have occupied as any other married person who commences a divorce action after July 19, 1980. The court noted that the plaintiff was not attempting to rely upon the foreign divorce.

The holding in Lavi is supported by Felt v. Felt, 93 A.D.2d 396, 461 N.Y.S.2d 835 (1st Dept. 1983), affirmed for the reasons stated in the majority opinion at the Appellate Division, 62 N.Y.2d 691, 476 N.Y.S.2d 537, 465 N.E.2d 44 (1984), which arose in a different, but still analogous, context. In Felt, the plaintiff brought an action in 1978 to declare that a prior Dominican Republic divorce was invalid and that she, not another woman, was the lawful wife of defendant. In November, 1981, plaintiff sought to discontinue her action so that she might bring a divorce action against the defendant. That divorce action would be subject potentially to the provisions of the Equitable Distribution Law, Part B of subdivision 236 of the Domestic Relations Law. However, as a general rule, a plaintiff who commenced a matrimonial action prior to July 19, 1980 is not to be allowed leave to discontinue where the purpose is to bring a post July 19, 1980 matrimonial action to which the equitable distribution provisions of Part B would apply. See, e.g., Tucker v. Tucker, 55 N.Y.2d 378, 449 N.Y.S.2d 683, 434 N.E.2d 1050 (1982). The Felt court held that discontinuance would be allowable since the declaratory judgment action was not within the coverage of the pre-equitable distribution alimony provisions of Part A of section 236. Since plaintiff’s action was not within Part A in the first place, defendant was not protected by the provisions that generally insist that Part A control in actions commenced before July 19, 1980. Of necessity, Felt is consistent with Lavi in that Felt treated the declaratory judgment action there as coming within Part B if commenced on or after July 19, 1980, and even though the underlying foreign decree was procured well prior to that date.

Lavi was distinguished in Cross v. Cross, 112 A.D.2d 62, 491 N.Y.S.2d 353; 114 A.D.2d 824 (1st Dept. 1985). In Lavi, the parties cohabited together after they had been divorced in Mexico and, in the wife’s subsequent action to void the foreign decree, she was allowed temporary maintenance. In Cross, the plaintiff wife brought a divorce action and sought temporary maintenance, claiming a common law marriage had been created between herself and the defendant. The court held that the wife was not entitled to temporary support since she had failed to show a reasonable probability of success in proving the existence of a common law marriage. Her submissions on that score were “meagre” and she had not rebutted defendant’s claim that she had a subsisting marriage to another man. Lavi was inapplicable, said the Cross court, since the wife in Lavi had made a strong showing of the existence of a valid marriage.

The general inclusion within Part B of declaratory judgment actions directed to the validity or invalidity of a foreign divorce judgment must be interrelated with the like inclusion in Part B of proceedings to obtain maintenance or equitable distribution following a foreign judgment of divorce. See Domestic Relations Law § 236, Part B, subd. 2.

Although the provisions of Part B are broadly referred to as the Equitable Distribution Law, the provisions are not limited to property distribution, containing, for example, new provisions with respect to maintenance, insurance, and child support. Equitable distribution itself--as principles governing property distribution--is available only where a marriage is terminated by divorce, dissolution, annulment or declaration of nullity or in proceedings to obtain a distribution of marital property following a foreign judgment of divorce. Domestic Relations Law § 236, Part B, subd. 5(a).

If an action is brought to declare the nullity of a foreign judgment of divorce, all provisions of Part B, save the provisions with respect to property distribution, are applicable irrespective of the outcome of the declaratory judgment action. Domestic Relations Law § 236, Part B, subds. 2, 5(a). Hence, for example, maintenance and child support are awardable, even if the foreign divorce is declared valid. If the foreign divorce is declared valid, equitable distribution would also be obtainable under the statutory permission to make equitable distribution in proceedings to obtain a distribution of marital property following a foreign judgment of divorce. Domestic Relations Law § 236, Part B, subd. 5(a). On the other hand, if the declaratory judgment action results in a finding that the foreign divorce is invalid, the result would be that the parties are regarded as legally married and equitable distribution--as a mode of property distribution--would not be available unless a divorce or other termination of the marital status was granted. Hence, in Lavi and Felt, plaintiffs sought divorces.

However, the statutory extension of equitable distribution to proceedings to obtain maintenance or equitable distribution following a foreign judgment of divorce has its own pitfalls and requires analysis.

Part B extends to “proceedings to obtain maintenance or a distribution of marital property following a foreign judgment of divorce”. Under Part A, alimony could be awarded notwithstanding a refusal by the court to grant matrimonial relief because of a divorce, annulment or declaration of nullity granted in an action in which jurisdiction over the person of needy spouse was not obtained. The old law provided for a kind of back-door procedure; if a foreign divorce decree had been obtained by the supporting spouse, the needy spouse could nevertheless commence an action for matrimonial relief, lose because of the foreign judgment and obtain an alimony award if he or she was not subject to personal jurisdiction in the foreign proceedings. Part B authorizes direct action to obtain economic rights following a foreign judgment of divorce. Further, there is no requirement that the party commencing the New York post-divorce proceeding demonstrate that he or she was not subject to personal jurisdiction in the foreign divorce court. The party who seeks New York post-judgment relief could proceed even if he or she was the plaintiff in the foreign jurisdiction. Nor is there any requirement that the party who brings the post-divorce proceeding in New York be a New York resident, although the concepts of forum non conveniens as choice of law might apply.

An example of a case in which the party who obtained the foreign divorce was permitted to maintain a New York proceeding for equitable distribution is Mattwell v. Mattwell, 149 Misc.2d 505, 565 N.Y.S.2d 961 (Sup.Ct. Nassau County 1990). There, the court permitted the husband, who had obtained a divorce in Florida, to maintain a post-divorce action for equitable distribution in New York. The court noted that, because the Florida court lacked personal jurisdiction over the wife, the Florida court did not, and could not have, adjudicated the parties’ property rights. To deny the husband the right to maintain the proceeding, said the court, would leave both parties in economic limbo. The court stated that dismissal of the proceeding would deny the husband his right to a determination of marital property without due process.

In Mattwell, the husband obtained the Florida divorce based on the marriage being irretrievably broken. The wife did not challenge Florida’s jurisdiction to grant a divorce. The Mattwell court was plainly troubled with the wife’s contention that, because the husband submitted to Florida jurisdiction, he should be precluded from seeking property distribution in New York. Accepting that argument would mean that the parties’ economic rights would be left in limbo unless and until the wife herself decided to maintain an action to have those rights determined. However, the statute, as noted above, does not restrict the availability of the New York post-divorce proceeding to only those who were defendants in the foreign proceeding. And it would seem harsh to preclude the husband from obtaining equitable distribution since that relief was not available to him in Florida, due to the absence of personal jurisdiction to determine that issue.

It is important to stress that in this context, the party maintaining the proceeding is acting on the basis that the foreign decree is valid or has been held to be so. If the party maintaining the litigation desired to attack the decree, that attack would be by way of declaratory judgment.

In the discussion above, it was stated that maintenance would be available in the declaratory judgment action where the action was commenced on or after July 19, 1980, even if the divorce was procured before that date. As also noted, however, equitable distribution itself would not be available if the decree is held invalid unless the marriage was otherwise terminated. If the decree is valid, equitable distribution would be available--but with a catch. To obtain equitable distribution, the foreign judgment must have been rendered in a proceeding commenced on or after July 19, 1980. Subdivision 2 of Part B of DRL § 236 stipulates that the listed actions must have been “commenced on and after the effective date of this part”--i.e., July 19, 1980. The statute appears on its face only to require that the New York post-divorce relief proceeding be commenced on or after July 19, 1980. However, to allow equitable distribution following a foreign divorce which pre-dates Part B’s effective date would lead to an inequitable result; New York actions commenced before the effective date would not be subject to Part B, but parties to foreign actions commenced before the effective date could obtain Part B relief. In keeping with the pronounced intent of the Legislature to apply Part B only to actions or proceedings commenced on or after the effective date, subdivision 2 should be construed as permitting post-foreign divorce relief only where the foreign divorce proceedings were commenced on or after July 19, 1980.

In Elson v. Elson, 149 A.D.2d 141, 545 N.Y.S.2d 311 (2nd Dept. 1989), the Appellate Division, Second Department, held that, in order to take advantage of the statutory allowance of equitable distribution following a valid foreign divorce, the foreign divorce must have been obtained in proceedings brought after the Equitable Distribution Law effective date of July 19, 1980. InElson, the husband obtained, in 1979, a judgment of divorce in Colorado in proceedings in which the wife, who was not a Colorado resident, did not appear. In 1986, the wife commenced action in New York, seeking a divorce and equitable distribution, as well as alternative economic relief in the event that the court held the Colorado divorce valid. The Appellate Division, agreeing with the trial court, held that the Colorado divorce was entitled to full faith and credit in so far as it terminated the marital status. Having so held, the court was required to decide whether the wife could obtain equitable distribution following the foreign judgment of divorce. The court held that the wife could not be granted such relief because the Colorado action had been commenced prior to July 19, 1980 and it would be improper to allow the wife to obtain such relief since, had the husband obtained a New York divorce in 1979, she would have fared no better. Nevertheless, the court held that the wife could obtain an award of maintenance since the Colorado court lacked personal jurisdiction over her and, therefore, could not have validly ruled on her claims for spousal support. Accord, Kiss v. Kiss, 132 Misc.2d 368, 503 N.Y.S.2d 696 (Sup.Ct. Onondaga County 1982); Bouhana v. Bouhana, 112 Misc.2d 314, 447 N.Y.S.2d 115, (Sup.Ct. Suffolk County 1982).

The requirement that to obtain equitable distribution following a valid foreign divorce judgment, the foreign divorce action must have been commenced on or after July 19, 1980, is not inconsistent with Lavi v. Lavi, 103 A.D.2d 400, 480 N.Y.S.2d 338 (2nd Dept. 1984) discussed supra. In Lavi, the court took note of the suggestion that it might be an inequitable result to allow equitable distribution after a foreign judgment of divorce where the foreign proceeding was commenced before July 19, 1980, while refusing equitable distribution after a New York action commenced before July 19, 1980. However, as the Lavi court stressed, the plaintiff there was asserting the invalidity of the foreign decree. If that decree was held invalid and null, the plaintiff would occupy the same position as any other divorce plaintiff in an action commenced in New York following the July 19, 1980 effective date of the Equitable Distribution Law. The Lavi court noted that whether the plaintiff would ultimately succeed on her claim that the Mexican divorce was a nullity and that she was entitled to a New York decree was not the issue then before the Court. It is suggested, however that if the plaintiff failed in her attack upon the Mexican decree, then equitable distribution would be precluded.

The authorization of proceedings to obtain maintenance or equitable distribution following a foreign judgment of divorce would appear to have the greatest utility in two contexts. The statute is of value where a spouse obtains a divorce in his or her home forum but is unable to obtain personal jurisdiction over the other spouse who lives in New York. Under such circumstances, New York could serve as the forum for determining the parties’ economic rights. This remedy must be viewed in conjunction with the more traditional concept that a foreign judgment of divorce, rendered in the absence of personal jurisdiction over the defendant, is given no effect on property rights. SeeEstin v. Estin, 68 S.Ct. 1213, 334 U.S. 541, 92 L.Ed.2d 1561 (1948); Vanderbilt v. Vanderbilt, 1 N.Y.2d 342, 153 N.Y.S.2d 1, 135 N.E.2d 553 (1956), affirmed, 77 S.Ct. 1360, 354 U.S. 416, 1 L.Ed.2d 1456 (1957). These principles came together in Radcliffe v. Radcliffe, 137 Misc.2d 859, 522 N.Y.S.2d 823 (Sup.Ct. Suffolk County 1987).

In Radcliffe, the husband relocated to Florida and commenced a divorce action there, serving the New York wife by publication. A Florida court granted the husband a divorce. The wife then commenced a proceeding in New York to obtain equitable distribution following a foreign divorce judgment. However, the husband died before equitable distribution could be directed. The question that came before the court was the effect of the ex parte divorce and death upon real estate held by the parties as tenants by the entirety and upon items of personal property, including pension and retirement benefits.

The court held that the Florida divorce, because it was not based on personal jurisdiction, did not terminate the tenancy by the entirety. The argument was advanced that, even if the divorce was not effective as to property rights at the time of its entry, the wife later ratified the divorce by bringing a proceeding based on the divorce to obtain equitable distribution. The court rejected this contention, stating that the wife could have withdrawn the proceeding for equitable distribution and the proceeding would not have any effect on the parties’ rights until a judgment awarding equitable distribution is made. However, the husband’s death abated the proceeding for equitable distribution.

The court held that, since the Florida divorce did not terminate the tenancy by the entirety, the wife’s right of survivorship remained intact and that she succeeded to the sole ownership of the property by operation of law upon the husband’s death. However, the court also held that, because the proceeding to obtain equitable distribution had abated, the wife’s recourse as to personal property was by way of claim against the husband’s estate.

The statute also permits relief where personal jurisdiction over both spouses was acquired by the foreign tribunal. Thus, the second common situation where the statute could be of utility is where both parties submitted to personal jurisdiction in the foreign court and now seek to have their economic rights determined. The facts in theLavi case, supra, may be built upon to illustrate the point. In Lavi, it appeared that the parties, without having signed a separation or other economic agreement, voluntarily consented to the jurisdiction of the Mexican divorce court. The resulting judgment resolved only the status question. If Mexican proceedings occurred after July 19, 1980, either party could maintain proceedings in New York for equitable distribution or maintenance following a foreign judgment of divorce.

Some words of caution are appropriate here. First, if property issues were litigated or determined in the foreign court, post-decree relief in New York might be unavailable on the ground of res judicata or collateral estoppel, as applied through the doctrines of full faith and credit or comity, depending upon whether the judgment was rendered by a court of a sister state or foreign country. It is also possible that New York post-judgment relief may be barred by collateral estoppel where the property issues were not actually litigated but could have been. In Pearson v. Pearson, 108 A.D.2d 402, 489 N.Y.S.2d 332 (2nd Dept. 1985), affirmed, 69 N.Y.2d 919, 516 N.Y.S.2d 629, 509 N.E.2d 324 (1987), it was stated that a foreign divorce decree in which both parties were subject to the personal jurisdiction of the court is entitled to full faith and credit by the courts of New York. However,Pearson involved a sister state decree; principles of comity control recognition of foreign country divorce judgments.

Dealing with the circumstance where there has been a prior determination in a foreign country, collateral estoppel was found to be a bar in DeGanay v. DeGanay, 269 A.D.2d 157, 701 N.Y.S.2d 434 (1st Dept. 2000) which involved prior judgments of the French courts dissolving a marriage and liquidating the marital estate. The parties had entered into a prenuptial agreement which adopted a French separate property system for distributing the marital property. That agreement was validated by the French courts and the French judgment was granted comity by the New York courts. (See De Ganay v. De Ganay, 261 A.D.2d 175, 689 N.Y.S.2d 501 (1st Dept. 1999), leave to appeal denied, 93 N.Y.2d 818, 697 N.Y.S.2d 565, 719 N.E.2d 926 [1999]). Since the French courts directed the liquidation of the marital estate in accordance with the provisions of the prenuptial agreement, the New York courts concluded that the French judgment had effected a liquidation of all of the property of the parties. While the wife claimed that certain property was not specifically addressed in the French judgments, the matrimonial court, affirmed by the Appellate Division, held that this contention could have been raised in the French proceedings. However, the wife had brought proceedings in France to modify or vacate the French judgments and the Appellate Division held that any issue as to the preclusive effect of those judgments should be resolved by the French courts, not the New York courts. Thus, whether the French courts granted the wife relief or not, the New York courts treated the matter as concluded by the French judgments, either as is or as those judgments might be modified.De Ganay v. De Ganay, 269 A.D.2d 157, 701 N.Y.S.2d 434 (1st Dept. 2000); see also Bourbon v. Bourbon, 300 A.D.2d 269, 751 N.Y.S.2d 302 (2nd Dept. 2002).

Earlier, in Braunstein v. Braunstein, 114 A.D.2d 46, 497 N.Y.S.2d 58 (2nd Dept. 1985), the court held that a foreign country divorce judgment, which did not address the question of property distribution as between the parties, does not bar a subsequent post-divorce proceeding in New York to obtain equitable distribution of marital property. The court commented that a post-foreign divorce attempt to obtain equitable distribution in New York might be precluded under the principles of collateral estoppel and res judicata but that no preclusion would be found where the issue of property distribution was not addressed in the prior foreign country proceeding and was not sought by the parties therein. However, the court sustained a finding that the wife’s attempt to obtain spousal maintenance and child support was precluded by the litigation of those issues in the foreign court which denied her maintenance.

Collateral estoppel was found not to be a bar to equitable distribution following a foreign divorce judgment in Nikrooz v. Nikrooz, 167 A.D.2d 334, 561 N.Y.S.2d 301 (2nd Dept. 1990). There, a divorce was issued by an English court which awarded the wife custody of the parties’ child and made provision for visitation by the husband. The English divorce did not, however, make any provision for support, maintenance or distribution of marital property. The English proceedings had been brought by the wife after the husband had commenced a New York action, which New York action he later abandoned. While the parties had reached a tentative settlement during the pendency of the English proceedings, that settlement was never finally concluded.

The Appellate Division held that, because the English court did not address the financial or property issues and no agreement as to those issues was ever concluded by the parties, the wife could maintain an action for equitable distribution following a foreign divorce judgment. The court also held that there was no merit to the husband’s claim that the wife should be equitably estopped from pursuing her claim for equitable distribution.

The Braunstein and Nikrooz cases are sustainable because a foreign country judgment was involved. Such a judgment, under the doctrine of comity, need not be given any recognition at all. Hence, to give it limited recognition does no violence to the doctrine. However, if a sister state judgment is involved, the result is different. Sister state judgments are entitled to full faith and credit, mandatory recognition. And, under usual collateral estoppel principles, that which could have been litigated but was not is precluded just as much as that which was relitigated is precluded.Boronow v. Boronow, 71 N.Y.2d 284, 525 N.Y.S.2d 179, 519 N.E.2d 1375 (1988), discussed in Practice Commentary C234:2 to DRL § 234, supra.

In O’Connell v. Corcoran, 1 N.Y.3d 179, 770 N.Y.S.2d 673, 802 N.E.2d 1071 (2003), the Court of Appeals held that if a sister state divorce decree would serve as a bar to a subsequent action for equitable distribution in a proceeding brought in the decree-rendering state, then a post-decree equitable distribution proceeding is barred in New York also, pursuant to the Full Faith and Credit Clause of the United States Constitution.

In O’Connell, the plaintiff brought a New York action for divorce but her complaint was dismissed for failure of proof. She then moved to Vermont and, after establishing Vermont residency, brought another action for divorce, this time in Vermont. The defendant opposed the Vermont divorce and was notified by the Vermont court to appear for a hearing on the divorce issue and a motion for a property division. The husband appeared pro se on the return date but had his New York counsel available in the courtroom. The husband did not interpose any jurisdictional defense or seek to limit his appearance to a jurisdictional issue. During the hearing, the plaintiff’s attorney informed the Vermont court that all that the plaintiff desired was a divorce. When the Vermont court asked about the property distribution issues, plaintiff’s counsel explained that all of the parties’ marital assets were in New York and asserted, albeit erroneously, that the Vermont court lacked jurisdiction to distribute the property. Neither the defendant nor the Vermont court contested this statement. Defendant argued only that the plaintiff’s prior defeat in New York should bar her from succeeding in obtaining a divorce in Vermont. At the end of the hearing, plaintiff was granted a divorce but no provision was made for property distribution. Plaintiff, the now former wife, then returned to the New York courts with a new proceeding--this time for equitable distribution following a foreign judgment of divorce. While both the matrimonial court and the Appellate Division, Third Department, ruled that the wife’s equitable distribution case was not barred by the Vermont decree, the Court of Appeals, reversing, ruled that it was.

The Court of Appeals held that, while the Equitable Distribution Law is broadly worded to permit parties to obtain post divorce equitable distribution following a foreign divorce judgment, making no distinction between ex parte or bilateral divorces, the statute should be construed to extend only as far as is constitutionally permissible. Under the Full Faith and Credit Clause, a judgment of a state court must be given the same effect in every other court as it would have in the state in which the judgment was rendered. Under Vermont law, because the Vermont court had personal jurisdiction over both parties, it could have distributed their property, counsel’s erroneous statement notwithstanding. That rule is the same in New York. Further, in Vermont, like New York, res judicata bars the litigation of a claim or defense if there is final judgment in former litigation in which the parties, the subject matter and the causes of action are identical or substantially identical. In Vermont, like New York, this doctrine bars claims that could have been litigated, as well as claims that actually were litigated. Since the wife could have litigated her equitable distribution claims in Vermont, she was precluded from litigating them in New York after the rendition of a Vermont judgment. Critically, in Vermont, just as in New York, public policy frowns on forum shopping and on bifurcation of divorce and equitable distribution proceedings.

In reaching this resolution, the Court of Appeals cited with favor the decision of the Appellate Division, Fourth Department, in Erhart v. Erhart, 226 A.D.2d 26, 649 N.Y.S.2d 302 (4th Dept. 1996). There, the wife, after the separation of the parties, moved to Pennsylvania. The husband brought a divorce action against the wife in Pennsylvania and the wife was served with process, including a notice warning her that if she did not file a claim for alimony, property or counsel fees before the final judgment was entered, she may lose the right to make any such claims. The wife, after consulting with an attorney, elected to default, a default that may have been prompted by Pennsylvania’s refusal to treat a professional license as marital property. The wife and her counsel may have believed that the wife would have been better off in New York, in a post-divorce equitable distribution proceeding. However, the Fourth Department dealt a blow to that strategy by holding that the wife’s post-divorce claims were barred. The Fourth Department noted that Pennsylvania had personal jurisdiction over the wife and, like New York law, Pennsylvania law provides that all claims must be raised in the matrimonial action or else be precluded later. Under Pennsylvania law, the former wife would not be permitted to make a collateral request for equitable distribution. That being the case, the Fourth Department held, New York was required to give the Pennsylvania decree the same treatment in New York that the decree would receive in Pennsylvania.

Thus, where a divorced spouse would be precluded from commencing a separate action for distribution of marital property within the sister state granting the divorce decree, New York must also preclude a subsequent action for equitable distribution of marital property.

Subdivision 2 of Domestic Relations Law section 236, Part B, expressly refers to a “foreign judgment of divorce”. The statute thus rules out an action to obtain economic benefits after a New York judgment of divorce is entered. Relief from a New York judgment may be obtained only by appeal or new trial. Cf. CPLR 5015. It may also be questioned as to whether the statute applies where the foreign decree is one of annulment or declaration of nullity, rather than “divorce”. The statute should apply, given the legislative intent to provide a New York economic remedy following a foreign decree dissolving the marriage. In this context, a decree which dissolves the marriage should be considered a “foreign judgment of divorce”, even if the dissolution was more in the nature of an annulment. However, the requirement that the foreign decree be one of “divorce” would seem to exclude foreign separation decrees from coverage.

Pursuant to Part B, subdivision 2, the statute appears to limit the relief that may be awarded post-foreign decree to “maintenance” and to “distribution of marital property”. Maintenance should be construed to mean any of the maintenance or maintenance related relief provided for in Part B, such as an award of exclusive occupancy of a marital dwelling or provision for life or health insurance policies. Similarly, a distribution of “marital property” should be considered to include any of the forms of property distribution provided for in Part B, including an adjudication as to the rights of the respective parties in separate property. In this circumstance, emphasis on the “marital” could, in some circumstances, be both undue and unjust.

Additionally, while the Equitable Distribution Law authorizes a proceeding to obtain maintenance or equitable distribution following a foreign judgment of divorce, it offers no other regulation on the procedural or substantive rules to be applied in such a proceeding. One important consideration that should be borne in mind is that of statute of limitations. While the Equitable Distribution Law does not provide a statute of limitations for this newly authorized proceeding, CPLR 213 (subd. 1), the residual statute of limitations, holds that an action for which no limitations period is specifically prescribed by law must be commenced within six years of the accrual of the cause of action.

Thus, it may well be that a proceeding to obtain maintenance or equitable distribution following a foreign judgment of divorce must be commenced within six years of the entry of the foreign decree. If not, property rights may have to be termed by non-equitable distribution principles.

As a general proposition, where personal jurisdiction existed in the foreign court, spousal support would be precluded, unless spousal support was provided for in the foreign decree. If the foreign decree did provide for spousal support, it would be subject to modification in New York under Section 466 of the Family Court Act. See, e.g., Silver v. Silver, 36 N.Y.2d 324, 367 N.Y.S.2d 777, 327 N.E.2d 816 (1975); Bouhana v. Bouhana, 112 Misc.2d 314, 447 N.Y.S.2d 115 (Sup.Ct. Suffolk County 1982).

An interesting variation on this question arose in Pearson v. Pearson, 69 N.Y.2d 919, 516 N.Y.S.2d 629, 509 N.E.2d 324 (1987). There, the parties obtained a New Hampshire divorce in September, 1977. Alimony for the wife was provided for in a separation agreement incorporated into the decree. However, the alimony provision was made pursuant to a New Hampshire statute which contained a “sunset” restriction. Alimony awards, under the statute, were effective for a maximum of three years, with the court having the power to renew, modify or extend the award for successive three year terms. In July 1979 and in April 1980, and within three years of the imposition of the alimony obligation on the husband, the wife successfully petitioned the Family Court in New York for enforcement of the alimony provision. However, she did not ask for an extension of the three year term. In 1983, the husband petitioned the Family Court for vacatur of the enforcement orders on the ground that the three year alimony term had expired in September, 1980 and had not been renewed. The Court of Appeals affirmed the decision of the lower courts to grant the husband’s petition to vacate the prior enforcement orders. The Court reasoned that once the underlying alimony obligation imposed by the New Hampshire court expired after three years, there was no longer any obligation that could be modified under Family Court Act Section 466(c). The Court also held that the enforcement of the alimony award by the Family Court did not, by itself, suffice to extend the duration of the award under New Hampshire law.

It should be noted that in Sperber v. Schwartz, 139 A.D.2d 640, 527 N.Y.S.2d 279 (2nd Dept. 1988), the court held that the death of a spouse, prior to any judicial decision to grant a divorce, ordinarily abates any proceedings to obtain equitable distribution. The Sperber case is discussed in more detail in Practice Commentary C236B:23, infra.
 
C236B:4 Marital Property--Generally

DRL § 236, Part B, subdivision 1(c), provides that “marital property” is all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action. The form in which title is held, proclaims the statute, is immaterial, except insofar as the parties have agreed to the contrary in an agreement made pursuant to Part B, subdivision 3. However, marital property does not include “separate property” as defined by the Legislature in Part B, subdivision 1(d)(1-4) nor does it include property which falls outside the time parameters set by the marital property definition.

The concept of marital property is a critical one to the Equitable Distribution Law. The theory of the statute is that marriage is an economic partnership and that, upon dissolution of the marriage, the tangible fruit of that partnership, the marital property, should be equitably divided between the parties. Prior to the advent of equitable distribution, New York was a title state, with property being distributed, in the absence of proof of fraud, to the spouse holding title to it.

Under equitable distribution, property, if it fits within the statutory definition of marital property, is subject to distribution in accordance with the equitable distribution principles, irrespective of the form of title. Thus, for purposes of classifying property to see whether it fits as marital or separate, the form of title was, by statute, intended to be irrelevant. That has proven to be the case with respect to property that fits the statutory definition as marital. However, form of title has been factored in to classify property as marital property though that property, by statutory definition, would otherwise have been separate. To illustrate, property which constitutes compensation for personal injuries is separate property, even when received during marriage. However, if the proceeds of a personal injury recovery are deposited into a joint bank account or otherwise invested in the names of both parties, a presumption arises, from the form of title, that the spouse who received the property made a gift of an interest in the property to the other spouse and that the property thereby became marital. Interspousal gifts are marital property. Thus, the rule has developed that if a spouse places his or her separate property in joint names, a presumption of gift arises; unless rebutted, the property is marital.See, e.g., Banking Law § 675[b]; Kosovsky v. Zahl, 257 A.D.2d 522, 684 N.Y.S.2d 524 (1st Dept. 1999); Judson v. Judson, 255 A.D.2d 656, 679 N.Y.S.2d 465 (3rd Dept. 1998); Brugge v. Brugge, 245 A.D.2d 1113, 667 N.Y.S.2d 180 (4th Dept. 1997); Geisel v. Geisel, 241 A.D.2d 442, 659 N.Y.S.2d 511 (2nd Dept. 1997); Parsons v. Parsons, 101 A.D.2d 1017, 476 N.Y.S.2d 708 (4th Dept. 1984); Coffey v. Coffey, 119 A.D.2d 620, 501 N.Y.S.2d 74 (2nd Dept. 1986). But the spouse, whose separate property it otherwise would have been, may receive credit for the amount of separate property contributed to creating a marital asset. See, e.g., Myers v. Myers, 255 A.D.2d 711, 680 N.Y.S.2d 690 (3rd Dept. 1998); Rheinstein v, Rheinstein, 245 A.D.2d 1024, 667 N.Y.S.2d 156 (4th Dept. 1997); Pauk v. Pauk, 232 A.D.2d 386, 648 N.Y.S.2d 621 (2nd Dept. 1996); Coffey v. Coffey, supra.

Marital property is marital property, irrespective of its location. If the court has personal jurisdiction over the parties, it may adjudicate as to property located out of state. SeeMiller v. Miller, 109 Misc.2d 982, 441 N.Y.S.2d 339 (Sup.Ct. Suffolk County 1981).

While the statute sets out time parameters within which marital property may be acquired, it does not grapple with conceptions as to what constitutes property. In the leading case of O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 746, 489 N.E.2d 712 (1985), the Court of Appeals defined marital property as “things of value arising out of the marital relationship”, provided those things of value are acquired within the statutory parameters. Thus, marital property is not just property that happens to be marital. Instead, “marital property” is a totally new concept that sweeps within it all tangible fruit of the economic partnership that exists between married persons, even if those items would not be categorized as property under classical definitions. In short, marital property is anything that has a provable economic worth which is the product of the efforts of either or both spouses during their economic partnership.

In O’Brien, the Court of Appeals declared a license to practice a profession, acquired during marriage and before the execution of a separation agreement or commencement of a matrimonial action, to be marital property. Many other items of economic worth have been classified as marital property.

In DeJesus v. DeJesus, 90 N.Y.2d 643, 665 N.Y.S.2d 36, 687 N.E.2d 1319 (1997), the Court of Appeals dealt with the proper equitable distribution treatment of restricted stocks and stock option benefit plans, which were offered as part of a deferred compensation package. InDeJesus, the husband was, shortly before the divorce action was filed, permitted to participate in two plans by his employer. Under one plan he was entitled to purchase shares in his employer at a fixed price but to be executed in three annual installments. The other plan entitled the husband to receive shares in the employer outright in three annual installments. Both plans were contingent upon the husband’s remaining employed with the company and both were characterized by the employer as “incentive” for corporate officers.

In the trial court, the husband argued that the wife should not receive any share of the stocks subject to the plans, maintaining that his interest had not matured and might never mature since he might leave the company. The trial court, affirmed by the Appellate Division, held that the interest in the plans was marital property since the benefits were bestowed on the husband during the marriage. These courts ordered that the interest be divided equally, with the husband to serve as constructive trustee of the wife’s shares as they vest.

The Court of Appeals held that additional findings were necessary as the approach taken by the lower courts failed to properly separate out interests acquired by the husband prior to the marriage or to the commencement of the action. The Court held that restricted stock plan interests are marital property to the extent that such interests were granted in recognition of the employee’s services to the date of the matrimonial action. However, the Court also ruled that plan interests are not marital property to the extent that such interests represent incentives for post-commencement services.

In order to determine the portion of restricted stock plan interests which are subject to equitable distribution, the courts must apply a multi-tiered analysis. First, the court must determine which portions of the interests are compensation for past services and which portion are incentives for future services.

To the portions which are compensation for past services, in order to factor out any premarriage services, the court must apply a fraction. The numerator is the length of time from the later of the beginning of the titled spouse’s employment with the company or the beginning of the marriage, to the date of the grant. The denominator is the time from the beginning of the titled spouse’s employment until the date of the grant.

With respect to the portions found to be granted as an incentive, the court must use another fraction to determine the portions attributable to the marriage. The numerator of this fraction is the period of time from the date of the grant until the cut-off date (signing of separation agreement, commencement of matrimonial action). The denominator of the fraction is the period of time from the date of the grant until the stock plan matures.

Of course, once the court has ascertained the marital component, it must determine the portion to be equitably distributed.

In Ullah v. Ullah, 161 A.D.2d 699, 555 N.Y.S.2d 834 (2nd Dept. 1990), the court held that lottery winnings, including the right to future payments due after the commencement of the action, may be considered marital property, at least where the winnings are attributable to a wager of marital funds. The court also found it appropriate to divide the lottery winnings equally given the “fortuitous circumstances” of hitting the jackpot and the absence of any special “labor or toil” by either spouse. See also as to lottery winnings,Campbell v. Campbell, 213 A.D.2d 1027, 624 N.Y.S.2d 493 (4th Dept. 1995) and Smith v. Smith, 162 A.D.2d 346, 557 N.Y.S.2d 22 (1st Dept. 1990), appeal denied, 77 N.Y.2d 805, 568 N.Y.S.2d 913, 571 N.E.2d 83.

These are offered only for illustration purposes; the types of items considered marital property is broad and the cases dealing with them too numerous to mention. However, special categories of property items are separately considered in further commentaries, including professional practices and licenses and pension plans.

To constitute marital property, the property must be acquired during the marriage. Property acquired before the marriage is specifically earmarked as separate property. Thus, property acquired by a couple that cohabits during the period of cohabitation is not marital property, even if the parties later marry. It is only the property that is acquired after the marriage--or post-marriage appreciations in separate property--that may be considered marital. See Josan v. Josan, 134 A.D.2d 486, 521 N.Y.S.2d 270 (2nd Dept. 1987); Clerk v. Clerk, 132 A.D.2d 456, 133 A.D.2d 328, 517 N.Y.S.2d 512 (1st Dept. 1987), appeal denied, 70 N.Y.2d 611, 523 N.Y.S.2d 495, 518 N.E.2d 6; Thompson v. Pittman, 123 A.D.2d 683, 506 N.Y.S.2d 979 (2nd Dept. 1986). It is only where some right in the property is acquired after the marriage that the property will be treated as entirely marital. In Zuch v. Zuch, 117 A.D.2d 397, 503 N.Y.S.2d 343 (1st Dept. 1986), the husband, prior to marriage, entered into a contract to purchase a cooperative apartment, with the closing held after the marriage had occurred. The court held the interest in the cooperative, titled solely in the husband, to be marital property.

The line of authority limiting marital property to interests acquired after marriage is consistent with the underlying statutory premise--that marriage is an economic partnership. The economic partnership created by marriage cannot exist until marriage has occurred. If non-marital cohabitants wish to form an economic partnership, they may do so; but the partnership can be created only by agreement, not by operation of law. SeeMorone v. Morone, 50 N.Y.2d 481, 429 N.Y.S.2d 592, 413 N.E.2d 1154 (1980).

This leads to an inconsistency in the law. An oral agreement between non-married cohabitants as to a division of property is enforceable. Morone v. Morone, supra. However, if the parties marry, an oral agreement made “before or during the marriage” is not enforceable in a later matrimonial action, at least where the agreement was made on or after July 19, 1980. DRL § 236, Part B (subd. 3). It would seem that the oral agreement between cohabitants, prior to their marriage, would be entirely unenforceable, even as to provisions that were to be applied only during cohabitation. An oral agreement between cohabitants who later marry may be enforceable in a subsequent matrimonial action where the agreement was made prior to the statutory effective date of July 19, 1980. This is because the provision of the Equitable Distribution which imposes the requirement of a formal writing also stipulates that it is not to “affect the validity of any agreement made prior to the effective date”. Parties who have cohabited together and have made oral agreements should be advised, when deciding to marry, to reduce their agreement to a formal writing, else run the risk that the agreement will be entirely unenforceable.

Greater difficulty has been encountered in determining whether an event has occurred which terminated the acquisition of marital property. The statute sets as the termination event the first to occur of the execution of a separation agreement or commencement of a matrimonial action. Thus, property acquired after either event is not marital property, even though the parties remain, at least technically, married. The Legislature has chosen to cut off the accumulation of marital property at legally cognizable signs of marital discord--a written separation agreement or the institution of a matrimonial action.

Property acquired after the execution of a separation agreement is outside the statutory definition of marital property. The separation agreement should be effective to terminate accrual of marital property only when both parties have executed it. Curiously, while other statutory references to agreements focus on a “valid” agreement of the parties, to terminate the acquisition of marital property, the statute does not on its face insist that the agreement be a valid one. Apparently, once a written agreement is executed, property acquired thereafter is not marital property and would not become marital property if the agreement is later held invalid. Such a result may be unjust if the agreement was obtained by fraud, duress, or coercion and the culpable spouse thereafter acquires significant property. There should be room for an alternative construction, at least where necessary to avoid an injustice. One alternative construction is that, where the agreement is declared void ab initio, the agreement ceases to have any legal significance. SeeAngeloff v. Angeloff, 56 N.Y.2d 982, 453 N.Y.S.2d 630, 439 N.E.2d 346 (1982). If the agreement is effectively eradicated, it should be eradicated for purposes of the marital property definition as well.

The statutory definition of marital property intersects with the preclusion, in subdivision 5(a) of the statute, of equitable distribution where the parties have entered into an agreement, pursuant to subdivision 3, which governs the ownership, division, or distribution of their marital property. Subdivision 5(a) proscribes equitable distribution where the agreement constitutes a comprehensive settlement of the parties’ property rights. See, e.g., De Jose v. De Jose, 66 N.Y.2d 804, 497 N.Y.S.2d 907, 488 N.E.2d 837 (1985). However, equitable distribution is not precluded as to property which was not covered by the express terms of an agreement which was not a comprehensive settlement. Further, an agreement which is incomplete as to many basic terms is no agreement at all. An example of this situation is Brabaw v. Brabaw, 108 A.D.2d 1006, 485 N.Y.S.2d 153 (3rd Dept. 1985). There, prior to the wife’s commencement of a separation action, the husband transferred, by quitclaim deed, to the wife his interest in certain realty. The deed recited that the transfer was made as part consideration for the separation of the parties. However, no separation agreement was signed and, in fact, the husband refused to sign a subsequent formal written agreement. When the case was reached for trial, the action was converted to an uncontested divorce action with the issues of equitable distribution and maintenance to be determined, upon stipulation, by written evidence. The trial court, in making its determination of the equitable distribution questions, disregarded the transfer by the earlier quitclaim deed. The Appellate Division affirmed, holding that the recitation in the quitclaim deed did not constitute an effective opting out agreement, pursuant to subdivision 3 of Part B, due to the absence of many terms and conditions, such as an agreement to live apart and provisions with respect to spousal support. The result was that the property subject to the deed was marital property since it was acquired during marriage. The transfer to the wife did not affect the classification since the form of title is not to count and, in any event, interspousal gifts, during marriage, are marital property.

Though limited equitable distribution would be available where the parties made an effective, but not comprehensive, agreement, property acquired by either or both of the parties after the agreement was made would not be regarded as marital property. Roth v. Roth, 115 A.D.2d 975, 497 N.Y.S.2d 792 (4th Dept. 1985). In the Roth case, realty acquired jointly by the parties after the execution of a separation agreement was not up for equitable distribution if the agreement was ruled not to be a comprehensive settlement. The policy behind the rule is that marriage, as an economic partnership, is deemed dissolved for financial purposes upon the voluntary execution of a separation agreement between the parties, even if that agreement is not all-encompassing. On the other hand, only a formal, acknowledged separation agreement qualifies as a “separation agreement” the execution of which serves to cut-off further acquisition of marital property. An agreement to physically separate is not, by itself, a terminating event. Davis v. Davis, 128 A.D.2d 470, 513 N.Y.S.2d 405 (1st Dept. 1987).

An oral agreement, such as an informal banking arrangement, does not suffice to terminate the acquisition of marital property. Cooper v. Cooper, 217 A.D.2d 904, 630 N.Y.S.2d 158 (4th Dept. 1995). However, even though an oral agreement may be unenforceable per se, a party who, in prior judicial proceedings, takes a position in reliance upon the oral agreement, may be estopped by the matrimonial court from asserting to the contrary. Perkins v. Perkins, 226 A.D.2d 610, 641 N.Y.S.2d 396 (2nd Dept. 1996). In Perkins, the parties agreed to sell their cooperative apartment and split the proceeds. Each party took a share of the proceeds and did as he and she pleased with the funds. The wife used her share of the proceeds to purchase certain farm property, and the husband admitted in deposition testimony given in an action brought by a third-party creditor that he had no interest in the wife’s farm property. On these facts, the husband was held estopped by his conduct from playing “play fast and loose with the courts” by advocating contrary positions in different legal proceedings.

An interesting twist on this principle that an oral agreement to separate does not stop the accrual of marital property is found in Di Santo v. Di Santo, 198 A.D.2d 838, 604 N.Y.S.2d 413 (4th Dept. 1993). There, the parties had been married for over 12 years as of the time the action was commenced. However, the parties had been separated for 5 of those 12 years. It appeared that plaintiff led defendant to believe that she would receive title to the marital home if she accepted lower maintenance and child support payments than she otherwise would have been entitled to receive. Moreover, during the period of separation, defendant paid the mortgage payments and substantial amounts of tax payments and repairs. Under these circumstances, the courts awarded sole title to the residence to defendant.

The residence was apparently acquired prior to the separation and any increase in value would still be marital in nature. However, characterizing property as marital does not necessarily mean that the parties will share in it to the same degree, as Di Santo points out.

That property acquired by a spouse after physical separation from the other spouse is marital means only that the property is subject to equitable distribution. It does not mean that the property will necessarily be equally divided or even that the non-titled spouse will receive any award at all. How the property should be distributed will depend upon the court’s exercise of discretion, a discretion that hinges on the application of the relevant factors to the particular facts involved. An excellent example of this principle appears inGreenwald v. Greenwald, 164 A.D.2d 706, 565 N.Y.S.2d 494 (1st Dept. 1991). There, more than seven years lapsed from the time that the husband moved out of the marital residence to the time that the wife commenced a divorce action. During those years, the marital assets increased in value by nearly $7 million. However, during the period of separation, the wife sacrificed the progress of her own career to care for the parties’ emotionally troubled child and, in addition, continued to have a close business and social relationship with the husband. The principal asset of the husband was his rights in his employer’s employee stock ownership plan. Most of his shares in the plan were accumulated during the many years that parties resided together. Accordingly, the court found it appropriate to divide the appreciation between the spouses.

It should be noted that the court treated an apartment acquired by the husband after separation as marital because he had used marital funds to acquire it. As a result, the husband simply exchanged one marital asset for another. A change in the form of investment, even if it had occurred after a termination event, would not change the character of marital property into separate property.

In Greenwald, the husband argued that the wife should not share in any post-separation appreciation because she allegedly delayed bringing such an action in order to profit from the appreciation. The Appellate Division found no merit to this argument, holding that it was more in keeping with human nature to believe that the wife had a valid reason for not suing “to take what is due now rather than later and run the risk of its loss or depreciation”. 565 N.Y.S.2d at 499. Indeed, the wife claimed that she had not sought a divorce earlier because she hoped for a reconciliation.

It would seem that whether a spouse had good reasons, bad reasons, or no reasons at all for not commencing a divorce action should have no bearing on the distribution made in the ultimate divorce action. The decision whether or not to seek a divorce is a highly personal one which courts should not second-guess. For example, even if an objective observer might conclude that hopes for reconciliation are slim, a spouse has a right to hope for a reconciliation and refrain from seeking a divorce. No rights of the other spouse are impaired since he or she can always bring an action if he or she has an appropriate legal basis.

As an alternative to focusing on whether a divorce should have been brought sooner, it is suggested that the court should examine the activities of the parties during the period of separation, as well as the origins and nature of the assets at issue. Where the economic partnership of the parties has continued, despite their physical separation, or where the asset is a product of prior partnership efforts, there should be little reason to deprive either spouse of appreciation in value occurring during separation. That would give one spouse a windfall and prevent the other spouse from sharing in the full value of product of the marital partnership.

The argument advanced by the husband in Greenwald is similar to the holding in Musumeci v. Musumeci, 133 Misc.2d 139, 506 N.Y.S.2d 629 (Sup.Ct. Suffolk County 1986) that delay in commencement of an action may be considered in determining the appropriate distribution. Greenwald neither explicitly adopts or rejects the theory advanced in Musumeci.

Also quite relevant is Verrilli v. Verrilli, 172 A.D.2d 990, 568 N.Y.S.2d 495 (3rd Dept. 1991), which also rejected an effort to exclude post-separation appreciation from treatment as marital property. The court cogently observed that, as a result of the parties’ separation, the wife had to shoulder the major responsibility for childrearing; relieving the husband of that burden, even though the parties were no longer cohabiting, was a continuing indirect contribution to his ability to acquire post-separation assets.

The court refused to recognize an agreement to physically separate as a terminating event in Clerk v. Clerk, 132 A.D.2d 456, 133 A.D.2d 328, 517 N.Y.S.2d 512 (1st Dept. 1987), appeal denied, 70 N.Y.2d 611, 523 N.Y.S.2d 495, 518 N.E.2d 6, but, in doing so, employed a standard which is at variance with the statutory language. In Clerk, the parties began living together in 1964, got married in 1968, and physically separated in 1977. No separation agreement was made but, in 1981, the parties entered into a stipulation in Family Court. The divorce action was commenced in 1982.

The Appellate Division ruled that, in considering the wife’s claim for a share of the appreciation in the husband’s separate property, she should be credited with 13 years, the period from the time of the marriage to the execution of the stipulation in Family Court.

However, the making of a stipulation in Family Court should not have been viewed as equivalent to the making of a separation agreement. A separation agreement is a formal document which, while evidencing the parties’ physical separation, also defines the parties’ respective rights and obligations towards each other. The Family Court is a court of limited jurisdiction and stipulations made in Family Court which exceed the powers of the court may be unenforceable. SeeBorkowski v. Borkowski, 38 A.D.2d 752, 330 N.Y.S.2d 106 (2nd Dept. 1972). The courts have, in other contexts, recognized that Family Court stipulations are not the equivalent of separation agreements. SeeStone v. Stone, 45 A.D.2d 967, 359 N.Y.S.2d 351 (2nd Dept. 1974) (Family Court stipulation not a separation agreement for purpose of obtaining conversion divorce under DRL § 170 [subd. 6]).

As a result, it seems inconsistent with the statutory language to allow the acquisition of marital property to be terminated as of the date of a Family Court stipulation. Rather, the date of the commencement of the action should be used, with the court having the authority to take the conduct of the parties into account in making an equitable distribution of the marital property. Thus, the court could factor into its decision the conduct of the parties from the marriage, to their physical separation, and forward.

A possible argument that could have been raised in Clerk is whether the commencement date of the litigation in Family Court could be used as a termination event. The statute defines, as a terminating event, the commencement of “a matrimonial action”. DRL § 236, Part B (subd. 1[c]). However, the listing of matrimonial actions provided in subdivision 2 of the statute does not include any Family Court proceedings. Nor are Family Court proceedings regarded as matrimonial actions, as a general principle, under the CPLR. CPLR 105. Accordingly, it would appear that the commencement of Family Court litigation is not, by itself, a terminating event. However, while marital property will continue to accrue until the commencement of a qualifying matrimonial action, the court may properly take into account the conduct of both parties during the interval between the commencement of the Family Court proceeding and the matrimonial action.

Property acquired after a matrimonial action is commenced is not marital property. A matrimonial action is commenced by the filing of a summons with notice or a summons with verified complaint. DRL § 211. Thus, the filing of a summons in a matrimonial action cuts off the acquisition of marital property in most instances. Note that, prior to July 1, 1992, matrimonial actions were commenced, like other actions at the time, by service of process, rather than by filing. See CPLR 304. Earlier cases, thus, focus on the service date as the commencement date, rather than the filing date.

The statute permits a spouse to file a summons in a divorce action the day before significant property is to be received and, thereby, preclude that property from becoming marital property. Property acquired after commencement of the matrimonial action in which equitable distribution is being made is separate property. Rosenberg v. Rosenberg, 155 A.D.2d 428, 547 N.Y.S.2d 90 (2nd Dept. 1989); Ducharme v. Ducharme, 145 A.D.2d 737, 535 N.Y.S.2d 474 (3rd Dept. 1988), appeal denied, 73 N.Y.2d 708, 540 N.Y.S.2d 1003, 538 N.E.2d 355; Spinello v. Spinello, 129 A.D.2d 694, 514 N.Y.S.2d 456 (2nd Dept. 1987); Lynch v. Lynch, 122 A.D.2d 589, 505 N.Y.S.2d 741 (4th Dept. 1986). The defendant spouse will not, however, be without recourse, as two exceptions have been crafted under which property may still be treated as marital, though acquired after the commencement of the action.

The first exception holds that property, even though technically acquired after the matrimonial action was commenced, will be regarded as marital where the property can be traced to marital funds. Marcus v. Marcus, 135 A.D.2d 216, 137 A.D.2d 131, 525 N.Y.S.2d 238 (2nd Dept. 1988); see also Ducharme v. Ducharme, supra; Schieck v. Schieck, 138 A.D.2d 688, 526 N.Y.S.2d 502 (2nd Dept. 1988). This exception recognizes that property should not lose its marital character simply because the manner in which it is invested or held is changed after the action is commenced. Marcus is an example of this sort of tracing concept. There, the husband’s interest in a limited partnership was marital property. After commencement of what proved to be an unsuccessful matrimonial action, he liquidated his interest in the limited partnership and used the funds to acquire other properties. The Second Department held that, even assuming that the date of commencement of the unsuccessful action was the proper termination date, the properties would still be marital property as their source was in marital property. Likewise, the account receivable created by a loan made by the husband in Marcus to his daughter’s trust fund was held to be marital property, even though the loan was made after the commencement of the second (and successful) action brought by the wife. The monies used to make the loan came from income from marital property and, in the absence of evidence that income generated after the commencement of the action was used to make the loan, the receivable was held to be marital property.

The second exception holds that property acquired after the commencement of the action may be regarded as marital property where some right in the property was acquired during marriage. See, e.g., Stempler v. Stempler, 143 A.D.2d 410, 532 N.Y.S.2d 550 (2nd Dept. 1988), appeal dismissed, 74 N.Y.2d 715, 543 N.Y.S.2d 400, 541 N.E.2d 429, appeal denied, 75 N.Y.2d 709, 555 N.Y.S.2d 692, 554 N.E.2d 1280. This exception recognizes that the statutory cut-off date was not intended to preclude equitable distribution of property which had its roots in the relevant marital period. Thus, in Capasso v. Capasso, 129 A.D.2d 267, 517 N.Y.S.2d 952 (1st Dept. 1987), modified, 135 A.D.2d 469, 529 N.Y.S.2d 460, where the husband contracted, during marriage, to purchase two parcels of realty, those properties were held to be marital property even though title did not technically pass at a closing until after the action had been brought.

The concept of treating property as marital as long as some cognizable interest in the property was obtained during marriage is in keeping with the remedial policy of reading the category of marital property as broadly as possible. SeePrice v. Price, 69 N.Y.2d 8, 511 N.Y.S.2d 219, 503 N.E.2d 684 (1986).

An interesting illustration of a broad construction to pull property into the marital column is Freyer v. Freyer, 138 Misc.2d 158, 524 N.Y.S.2d 147 (Sup.Ct. Suffolk County 1987). The wife, in Freyer, graduated from medical school during marriage but commenced her divorce action six months before receiving her license to practice medicine in New York. The court held the license should still be regarded as marital property. The husband had made significant contributions towards the wife’s obtaining her license and the court was loathe to allow the wife, by the simple expedient of commencing an action on the eve of her licensing, to exclude the husband from sharing in this joint endeavor. TheFreyer holding is particularly appropriate because there is no statutory authorization for allowing a non-titled spouse any interest, whether by appreciation or otherwise, in after-acquired property. Indeed, after-acquired property is not even within the precise definition of separate property given by the statute. After-acquired property is simply put off on the side by the statute.

The point of the statute is to earmark the commencement of a matrimonial action as an event that, legally, dissolves the economic partnership of the spouses, though the parties remain legally married until the conclusion of the action. SeeMajauskas v. Majauskas, 61 N.Y.2d 481, 474 N.Y.S.2d 699, 463 N.E.2d 15 (1984); see alsoBiddlecom v. Biddlecom, 113 A.D.2d 66, 495 N.Y.S.2d 301 (4th Dept. 1985).

The real question that controls whether property is regarded as acquired before or after the commencement date is when did the right to the property or funds in questions accrue. Thus, in Antoian v. Antoian, 215 A.D.2d 421, 626 N.Y.S.2d 535 (2nd Dept. 1995), the court held that the wife’s individual retirement account was her separate property because she established that she acquired the funds in the account after the commencement of the action. Likewise, a bonus received after the commencement date is marital property if earned by pre-commencement employment. Hartog v. Hartog, 85 N.Y.2d 36, 623 N.Y.S.2d 537, 647 N.E.2d 749 (1995).

Another series of questions arises where property no longer exists at the time of the commencement of the action. In Rivera v. Rivera, 206 A.D.2d 970, 615 N.Y.S.2d 952 (4th Dept. 1994), the husband was an attorney who had been suspended from practice as of the time of commencement of the action (he was later disbarred). Because his law practice no longer existed at commencement, it was no longer an asset to be valued. Since the wife could not establish that the husband set out to commit misconduct in order to injure her rights to a marital asset, the law practice simply was not available for distribution. While the wife argued that the husband had wrongfully dissipated a marital asset, the court did not find favor in that contention. Rivera does not disclose the nature of the misconduct. But, in the absence of a showing to the contrary, it should be assumed that the husband’s misconduct resulted from an intentional act in furtherance of his own interests or from negligence in carrying out his practice. Either way, unless the wife could show that the conduct was aimed at injuring her rights, the wife was bound by the conduct of her economic partner. See Andrea v. Andrea, 152 Misc.2d 100, 575 N.Y.S.2d 240 (Sup.Ct. Nassau County 1991) (loss of pension by police officer due to post-divorce criminal conviction not a wasteful dissipation of marital assets).

Rivera should be contrasted with Grotsky v. Grotsky, 208 A.D.2d 676, 617 N.Y.S.2d 517 (2nd Dept. 1994) where the evidence showed that, during a period of a few months just prior to commencement of the action, the husband withdrew thousands of dollars from a marital account. Since the husband could not adequately explain what happened to this money, the Appellate Division concluded that the wife should be allowed her equitable share of the dissipated asset. To the same effect isMcGarrity v. McGarrity, 211 A.D.2d 669, 622 N.Y.S.2d 521 (2nd Dept. 1995), where the husband could not explain what happened to account funds in the period after commencement of the action. McGarrity held, in the absence of an explanation that the funds were used for legitimate marital expenses, the wife was entitled to recover one-half of the funds. In that case, recovery was had by increasing the wife’s share of another asset in order to compensate her for the dissipation of the account.

In a considerable number of Appellate Division and trial court decisions, it had been held that separate expenditures made out of marital funds could be recouped back into the marital estate upon equitable distribution and, conversely, marital expenses paid out of separate property could be recouped back into the separate property column. Those cases have been overturned by the Court of Appeals in two cases decided on the same day in 2009: (1) Mahoney-Buntzman v. Buntzman, 12 N.Y.3d 415, 881 N.Y.S.2d 369, 909 N.E.2d 62 (2009); and (2) Johnson v. Chapin, 12 N.Y.3d 461, 881 N.Y.S.2d 373, 909 N.E.2d 66 (2009).

In Mahoney-Buntzman, the wife sought to recoup money that had been expended during the marriage to pay the husband’s maintenance obligations to his prior spouse as well as to recoup moneys paid towards the husband’s student loan. The Court of Appeals held that, as a general rule, where payments are made before either party is anticipating an end to the marriage and where there is no fraud or concealment, the matrimonial courts should not look back and try to compensate for the fact that the net effect of some payments is to reduce marital assets or for the fact that payments out of separate property may have benefited both parties or even just the non-titled spouse. The Court of Appeals ruled that the matrimonial courts should not ordinarily second-guess economic decisions made during marriage. Thus, in Mahoney-Buntzman, the Court held that the wife was not entitled to recoup some or all of the funds paid to the first wife. The Court did hold out the possibility that there could be circumstances where equity requires a credit be given where marital property is used to pay off the separate debt of one spouse or to add to the value of one spouse’s separate property. Moreover, noted the Court, if expenditures are truly excessive, they could amount to a wasteful dissipation of assets--a type of economic fault which the Legislature has made an equitable distribution factor. But payments of maintenance to a former spouse did not fit within these exceptions. Likewise, payments for the husband’s student loan did not qualify, particularly since the degree that the husband earned could have been subject to equitable distribution, if it had generated an economic benefit. InJohnson, the Court held that the wife was not entitled to a credit for one-half of the money paid during the marriage towards the husband’s maintenance and child support obligations to his prior spouse.

A couple of other points are worth noting about these two cases. In Mahoney-Buntzman, the husband claimed that money he received was from the sale of stock which had been his separate, pre-marriage property. However, the settlement agreement which provided for the payment of the money stipulated that the payment would be reported as miscellaneous income on a “1099” tax form and, in order to compensate for the taxes that he would have to pay because of the payment was treated as income (and not the sale of stock), the monies were increased. The Court of Appeals ruled that it was proper to treat the money as marital, derived from business income during the marriage, and it would be impermissible to allow the husband to take a position contrary to that taken in his income tax return. The Court explained: “We cannot, as a matter of policy, permit parties to assert positions in legal proceedings that are contrary to declarations made under penalty of perjury on income tax returns.” 12 N.Y.3d at 422, 881 N.Y.S.2d at 373, 909 N.E.2d at 66.

In Johnson, the Court of Appeals upheld the Appellate Division’s reduction in the wife’s share of the appreciation in the husband’s separate-propertied residence from 50% to 25%. The Court of Appeals ruled that it was the husband’s income that was the sole source of the funds expended on the property and the husband’s involvements in the renovations to that property were more extensive than the wife’s.

In Hartog v. Hartog, 85 N.Y.2d 36, 623 N.Y.S.2d 537, 647 N.E.2d 749 (1995) the Court of Appeals addressed the relationship between income and assets. Essentially, the Court held that income can be counted twice, first as income, and second as an asset. The lesson to be drawn from Hartog is that an income-earning spouse spends at his or her own risk during the pendency of a matrimonial action.

In Hartog, the husband had earned a bonus during the marriage which was paid to him after the commencement of the action. The Appellate Division had declined to view the bonus as an item of marital property, ruling that a bonus is income and that this particular bonus had been considered and factored into the husband’s support obligations. Thus, it ruled that it would be double counting to view the bonus as an asset up for distribution. 194 A.D.2d 286, 605 N.Y.S.2d 749 (1st Dept. 1993). The Court of Appeals held that the Appellate Division “rationale and conclusion fail to heed our precedents and the generous reading which the Legislature intended to be accorded the term marital property in this respect”. 85 N.Y.2d at 49, 623 N.Y.S.2d at 544.

There can be little doubt that a bonus check, if received during the marriage and before commencement of the action, is an item of property. In that sense, it is no different than a check received in consideration for the sale of some item of tangible property. The real question is whether the bonus should be counted twice. Specifically, when an application for support is made, the applicant spouse will ask the court to determine support based upon the other spouse’s total income, both regular and bonus. Indeed, a bonus would ordinarily be included in gross income, which is the starting point for determining child support under the Child Support Standards Act. When support is determined, the payee spouse is, by definition, receiving a determined amount of the payor’s income, inclusive of bonus. To treat the bonus as a property item, is to count it twice.

The Court of Appeals seemingly permits this double-count. While it did not explicitly discuss this issue, it rejected the Appellate Division’s rationale, which was based on the view that there was a double-count.

The question remains then as to what the employee spouse should do with a bonus received after commencement of the action to try to work things out fairly. One possibility would be to turn over an after-tax portion of the bonus to the other spouse. By doing that, the employee spouse could assert that the entire bonus should no longer be counted as income to him or her and that the bonus has been eliminated as an asset to distribute. Another approach might be to pay the entire after-tax bonus into escrow, to await determination of the property question, and to again argue that the bonus should not, under the circumstances, be treated as an income item. To take the bonus and spend it, which is a third alternative, invites the bonus to be treated as both property and income.

A matrimonial action is defined, for the general purposes of Part B of DRL § 236, as including actions for annulment, for dissolution of a marriage, for divorce, for separation, for the declaration of a nullity of a void marriage, for a declaration of the validity or nullity of a foreign judgment of divorce, for a declaration as to the validity or nullity of a marriage, and proceedings to obtain equitable distribution following a foreign judgment of divorce. DRL § 236, Part B, subd. 2. Many other actions or proceedings that may be brought between married persons are not matrimonial actions. For example, support proceedings under Article 4 of the Family Court Act, proceedings to obtain a determination of child custody pursuant to Sections 70 and 240 of the Domestic Relations Law and applicable provisions of the Family Court Act, and family offense proceedings under the Family Court Act are not matrimonial actions and, thus, have no impact on the cut-off date for the acquisition of marital property unless joined with a matrimonial action. However, the existence of such other proceedings may reflect marital discord and an effective, practical cessation of a marital partnership that the court may consider in actually dividing the marital property.

The commencement of an action in which only a separation is sought or is granted is not regarded as a matrimonial action for purposes of the cut-off date. Although separation actions are generally within the category of matrimonial actions for purposes of the Equitable Distribution Law, such actions are excepted from the statutory definition of matrimonial actions insofar as equitable distribution itself is concerned. Equitable distribution is not available in an action for separation and it would defy logic to use the commencement date of an action in which equitable distribution was not available as the cut off date for purposes of a later action in which equitable distribution is available. In that instance, a prior separation action followed by a later divorce action, there would be two matrimonial actions, and it would seem preferable to regard the later divorce action as the matrimonial action for purpose of fixing what is and what is not marital property. However, where a separation judgment is obtained, that judgment, and the parties’ conduct pursuant to it, are to be considered in dividing the property, along with all other relevant factors. SeePetre v. Petre, 130 Misc.2d 333, 496 N.Y.S.2d 335 (Sup.Ct. Erie County 1985), affirmed, 122 A.D.2d 559, 505 N.Y.S.2d 396; see alsoForcucci v. Forcucci, 83 A.D.2d 169, 443 N.Y.S.2d 1013 (4th Dept. 1981).

The view that the commencement of a separation action should not be treated as a terminating event for the acquisition of marital property was adopted by the Court of Appeals in Anglin v. Anglin, 80 N.Y.2d 553, 592 N.Y.S.2d 630, 607 N.E.2d 777 (1992). The Court ruled that the commencement of a separation action does not terminate further accruals of marital property. In taking that approach, the Court agreed with the First, Third and Fourth Departments, and overruled the contrary position of the Second Department. SeeMatch v. Match, 179 A.D.2d 124, 583 N.Y.S.2d 224 (1st Dept. 1992); Anglin v. Anglin, 173 A.D.2d 133, 577 N.Y.S.2d 963 (3rd Dept. 1992); Petre v. Petre, 130 Misc.2d 333, 496 N.Y.S.2d 335 (Sup.Ct. Erie County 1985), affirmed on memorandum of Special Term, 122 A.D.2d 559, 505 N.Y.S.2d 396 (4th Dept. 1986); contra, Lennon v. Lennon, 124 A.D.2d 788, 508 N.Y.S.2d 507 (2nd Dept. 1986).

In Anglin, the Court of Appeals noted that equitable distribution is to be carried out upon the dissolution of the marriage. Separation actions do not constitute the functional or cognizable equivalent of the dissolution of the marital economic partnership or of the marriage itself. However, the Court noted that the commencement of the separation action may be considered as a factor, among other relevant factors, in determining the ultimate equitable distribution. 592 N.Y.S.2d at 633. The Court’s holding means that assets acquired subsequent to the commencement of a separation action are not per se excluded from the pool of accruing marital property.

In Mesholam v. Mesholam, 11 N.Y.3d 24, 862 N.Y.S.2d 453, 892 N.E.2d 846 (2008), the Court of Appeals resolved a question that been festering for nearly 30 years, dating back to the 1980 enactment of the Equitable Distribution Law. The Law (D.R.L. § 236, Part B, subd. 1[c]) defines marital property as property acquired between the date of the marriage and “the commencement of a matrimonial action”. (emphasis added). While likely the Legislature meant the matrimonial action in which equitable distribution is to be effected, the use of the article “a” gave rise to the argument that if there was a prior action, which necessarily could not have been one in which equitable distribution was made, the commencement date of the prior action cut-off the acquisition of marital property.

The issue had most commonly arisen in circumstances where a party brought a divorce action, lost, and, when the other spouse brought a successful action, tried to shield property he or she acquired in the interim from being subjected to equitable distribution in the second action. The Second Department, in Marcus v. Marcus, 135 A.D.2d 216, 525 N.Y.S.2d 238 (2nd Dept. 1988), adopted an it-depends rule, meaning that whether the first action served as a cut-off date depended upon whether the commencement of the first action signaled the end of the marital relationship; in Marcus, it didn’t because the husband, though losing the first action, continued to reside with the wife and receive the benefits of the marital relationship. The Second Department adhered to this rule for many years, including Thomas v. Thomas, 221 A.D.2d 621, 634 N.Y.S.2d 496 (2nd Dept. 1995). These cases are no longer good law, because ofMesholam.

In Mesholam, the wife sued in 1994 but, five years later, was granted leave to discontinue the action. The husband turned around and almost immediately commenced his own action. The husband argued that his pension should be valued as of the commencement of the first action. This is a twist on the usual situation, because the husband was not trying to take advantage of his own prior action. The trial court held that it could not use the earlier date because the statutory provision regarding valuation date (DRL § 236, Part B, subd. 4[b]) precludes any valuation date earlier than the pending action. The Appellate Division modified on this point, ruling that valuation should be as of the first action since there was no evidence that the parties had reconciled and continued to receive the benefits of the marital relationship.

The Court of Appeals unanimously held that the commencement date of the later, successful action is the earliest valuation date. This sets a bright-line rule, rather than relying on uneven, ephemeral and personal interpretations of the parties’ intermediate conduct. However, that intermediate conduct is relevant to how to divide up the marital property. SeeMontalvo v. Montalvo, 43 A.D.3d 1013, 842 N.Y.S.2d 504 (2nd Dept. 2007) (in a pre-Mesholam decision, the court held that a dismissal on the merits of a matrimonial action forecloses the use of the commencement date of that action as the “cut-off” date for measuring the acquisition of marital property in a later, successful matrimonial action, though, the parties’ conduct during the interval between the actions may be considered in fashioning an appropriate distribution in the second action).

The Mesholam Court drew on the Court’s earlier decision in Anglin v. Anglin, 80 N.Y.2d 553, 592 N.Y.S.2d 630, 607 N.E.2d 777 (1992) (discussed above), holding that the commencement date of a prior, successful separation action did not terminate the acquisition of marital property for purposes of a later, successful divorce action, since equitable distribution was not available in the separation action.

Where a party files for bankruptcy during marriage, the party does not forfeit a claim to the equitable distribution of a marital asset by not listing it as an asset for bankruptcy purposes. This is because marital property rights are determined upon divorce and bankruptcy law does not require a spouse to list possible future rights to marital property in the bankruptcy schedules. Mattioli v. Mattioli, 48 A.D.3d 1143, 853 N.Y.S.2d 235 (4th Dept. 2008).
 
C236B:5: Marital Property--Professional Practices

Professional practices, established during marriage and prior to the commencement of a matrimonial action or execution of a separation agreement are marital property, subject to equitable distribution. E.g., Holterman v. Holterman, 3 N.Y.3d 1, 781 N.Y.S.2d 458, 814 N.E.2d 765 (2004); Grunfeld v. Grunfeld, 94 N.Y.2d 696, 709 N.Y.S.2d 486, 731 N.E.2d 142 (2000); Arvantides v. Arvantides, 64 N.Y.2d 1033, 489 N.Y.S.2d 58, 478 N.E.2d 199 (1985); Litman v. Litman, 93 A.D.2d 695, 463 N.Y.S.2d 24 (2nd Dept. 1983), affirmed 61 N.Y.2d 918, 474 N.Y.S.2d 718, 463 N.E.2d 34 (1984). Even where the practice commenced prior to marriage, the appreciation in the value of the practice, where there have been contributions by the non-professional spouse, is marital property subject to equitable distribution. SeeWood v. Wood, 119 Misc.2d 1076, 465 N.Y.S.2d 475 (Sup.Ct. Suffolk County 1983). In short, insofar as the reach of the Equitable Distribution Law is concerned, professional practices are not treated any differently than other business interests.

There are, of course, problems with valuation; however, valuation difficulties often appear with respect to other business enterprises. The unique aspect of professional practices is that the court may not award an actual interest in the practice to a non-professional spouse. A spouse who is not an attorney cannot be made a partner in a law practice; a spouse who is not a physician cannot be invited by the court to become a participating member of a medical group. However, the court is to value the practice and award an offsetting interest in other property to the non-professional spouse or, if those funds are insufficient, order a distributive award for the non-professional spouse. Indeed, the entire concept of a distributive award was designed to provide recompense to a spouse who, for legal or practical reasons, is not granted an actual ownership interest in a business or profession.

Law practices have been held to be marital property. See, e.g.Litman v. Litman, 61 N.Y.2d 918, 474 N.Y.S.2d 718, 463 N.E.2d 34 (1984); Hirschfeld v. Hirschfeld, 96 A.D.2d 473, 464 N.Y.S.2d 789 (1st Dept. 1983); Stolowitz v. Stolowitz, 106 Misc.2d 853, 435 N.Y.S.2d 882 (Sup.Ct. Nassau Co.1980). Medical practices are as well. SeeSweeney v. Sweeney, 118 A.D.2d 774, 500 N.Y.S.2d 282 (2nd Dept. 1986); Van Ess v. Van Ess, 100 A.D.2d 848, 474 N.Y.S.2d 90 (2nd Dept. 1984); Neyhorayoff v. Neyhorayoff, 108 Misc.2d 311, 437 N.Y.S.2d 584 (Sup.Ct. Nassau County 1981). So too with dental practices. SeeArvantides v. Arvantides, 64 N.Y.2d 1033, 489 N.Y.S.2d 58, 478 N.E.2d 199 (1985). Accounting practices are subject to equitable distribution as well. SeeCohen v. Cohen, 104 A.D.2d 841, 480 N.Y.S.2d 358 (2nd Dept. 1984), appeal dismissed, 64 N.Y.2d 773, 485 N.Y.S.2d 990, 475 N.E.2d 457.

Litman v. Litman, 93 A.D.2d 695, 463 N.Y.S.2d 24 (2nd Dept. 1983), affirmed 61 N.Y.2d 918, 474 N.Y.S.2d 718, 463 N.E.2d 34 (1984) raised the legal issue of whether a professional practice--there a law practice--is marital property subject to equitable distribution. In that case, the lower court, confronted with the question when the wife sought an award for experts’ fees, held that it could not be. The Appellate Division, Second Department, reversed: 93 A.D.2d 695, 463 N.Y.S.2d 24 (2nd Dept. 1983). The lower court had asserted that equitable distribution was not available since a law practice cannot be sold. The Appellate Division disagreed, stating that the Legislature established the “distributive award” concept to cover situations where the division of the actual marital property was impractical, impossible or illegal. Thus, a law practice is an appropriate subject for a distributive award. The court did, however, caution that it may be difficult to determine the value of a law practice. This difficulty, in turn, causes a need for experts and, thus, warranted the granting of an allowance to the wife for the obtaining of such experts. The Court of Appeals affirmed Litman for the reasons stated by the Appellate Division, remarking also that it could not conclude that expert opinion would not be of assistance in fashioning a distributive award. 61 N.Y.2d 918, 474 N.Y.S.2d 718, 463 N.E.2d 34 (1984). Although the Court of Appeals did express agreement with the reasons given by the Appellate Division, the caveat it added suggests that the Court focused more on the application for experts’ fees than on the issues of law involved in the equitable distribution of a law practice. The Court appears to have deferred consideration of the precise guidelines to be followed upon such a distribution to a case in which a distribution was, in fact, ordered. See alsoArvantides v. Arvantides, 97 A.D.2d 939, 468 N.Y.S.2d 728 (4th Dept. 1983),affirmed 64 N.Y.2d 1033, 489 N.Y.S.2d 58 (1985) (husband’s dental practice deemed marital property).

The earlier license cases, including Litman, expressed concern as to the potential difficulties in valuing a professional practice. Among the issues cited as troublesome was whether non-lawyers could share in the “good will” value of a law practice. SeeCherno v. Cherno, 118 Misc.2d 950, 461 N.Y.S.2d 975 (Sup.Ct. Nassau County 1983). However, these issues have mostly, if not, entirely fallen by the wayside. While, at one time, there were severe strictures upon the sale of a law practice which affected whether law practices had any true economic value beyond the value of their assets, law practices, including their good will, may be sold to other lawyers or law firms. See Rules of Professional Conduct, Rule 1.17 (eff. April 1, 2009).

The most common method utilized for valuing a professional practice is the capitalization of earnings method. SeeRice v. Rice, 222 A.D.2d 493, 634 N.Y.S.2d 761 (2nd Dept. 1995); Finocchio v. Finocchio, 162 A.D.2d 1044, 556 N.Y.S.2d 1007 (4th Dept. 1990). The capitalization method involves ascertaining the practice’s adjusted net income over a period of years; calculating a weighted average of the adjusted not income over the time period; and selection and application of a capitalization rate. Beckerman v. Beckerman, 126 A.D.2d 591, 511 N.Y.S.2d 33 (2nd Dept. 1987); see Bidwell v. Bidwell, 122 A.D.2d 364, 504 N.Y.S.2d 327 (3rd Dept. 1986); Davis v. Davis, 128 A.D.2d 470, 513 N.Y.S.2d 405 (1st Dept. 1987). The capitalization method is usually preferable over the net asset approach. White v. White, 204 A.D.2d 825, 611 N.Y.S.2d 951 (3rd Dept. 1994). The use of the capitalization of net earnings approach has special utility in cases in which a separate equitable distribution award is made for the value of a professional license or degree. See discussion in Practice Commentary C236B:6A, infra.

In capitalizing income over a period of years, abnormally high or low income years should be excluded, Vicinanzo v. Vicinanzo, 193 A.D.2d 962, 598 N.Y.S.2d 362 (3rd Dept. 1993); Sommer v. Sommer, 176 A.D.2d 1022, 575 N.Y.S.2d 178 (3rd Dept. 1991) (trial court must also consider lack of marketability). Valuation should not use data after the commencement date and should take into account necessary adjustments in determining principal’s compensation. SeeProcario v. Procario, 164 Misc.2d 79, 623 N.Y.S.2d 971 (Sup.Ct. Westchester Co.1994); but seeRice v. Rice, 222 A.D.2d 493, 634 N.Y.S.2d 761 (2nd Dept. 1995) (decline in H’s earnings postcommencement considered). The capitalization of net earnings method is predicated upon a finding that the principal at issue earns more from the practice than what he or she would earn as an employee. Where the professional does not earn more than “reasonable compensation” for his or her services, i.e. does not earn more than what he or she would reasonably expect to be paid as an employee, the practice has no value, other than the value of its fixed assets. SeeHirschfeld v. Hirschfeld, 96 A.D.2d 473, 464 N.Y.S.2d 789 (1st Dept. 1983). In Hirschfeld, the trial court valued a law practice by capitalizing the lawyer’s earnings in excess of what he would have received had he been employed at a fair salary. The Appellate Division reversed; it found that the wife did not succeed in establishing that the law practice had any intrinsic value beyond what the lawyer might make as an employee of a large firm or corporation. That the lawyer had luxury assets did not really indicate anything other than the probability that he earns more than he stated.

The capitalization of net earnings method is not exclusive. There are alternative methods of valuation. For example, a value that is fixed by a bona fide partnership agreement which predated the marital discord is relevant, though it is not conclusive. Burns v. Burns, 84 N.Y.2d 369, 618 N.Y.S.2d 761 (1994); Amodio v. Amodio, 70 N.Y.2d 5, 516 N.Y.S.2d 923 (1987). In Harmon v. Harmon, 173 A.D.2d 98, 578 N.Y.S.2d 897 (1st Dept. 1992), the court based its determination of value of a law practice upon the death benefit provisions set forth in the partnership agreement.

However, as the result of the Court of Appeals decision in McSparron v. McSparron, 87 N.Y.2d 275, 639 N.Y.S.2d 265, 662 N.E.2d 745 (1995), the use of a death benefit provision as the basis for practice valuation appears to be inappropriate where a separate award is also to be made for the residual value of the professional’s license. McSparron authorizes separate awards for practice and license, provided that there is no double-counting of the same asset or income stream. See discussion in Practice Commentaries C236B:6 and C236B:6A, infra. The use of a death benefit analysis predicates value on the assumption that the professional spouse died, leaving the surviving spouse to receive the death benefit. But, under McSparron, the spouse of a professional may receive, in addition to an award representing a portion of the value of a practice, distribution of a portion of the residual value of the professional’s license. The residual value of the license--representing the enhancement of earnings that will continue to flow during the professional’s remaining work-life time, assumes that the professional is alive to take advantage of that enhancement. Thus, there is a fundamental inconsistency between the use of a death benefit analysis for the value of the practice and the making of a separate award for the residual value of the license.

In Wadsworth v. Wadsworth, 219 A.D.2d 410, 641 N.Y.S.2d 779 (4th Dept. 1996) the trial court used the death benefit approach to value the husband’s interest in a law firm, but, in a decision which predated McSparron, did not make a separate award for the remaining value of the license to practice law. On review, which came after McSparron, the Appellate Division, Fourth Department held that the wife was now entitled to an additional award for the residual value of the license. The court agreed that before the license issue entered the picture, it was appropriate to use a death benefit valuation, citing to the Harmon case. But, suggested the court, now that a license award must also be made, the use of the death benefit approach may be inappropriate. Since the case had to be sent back to deal with the license issue, the court also directed that the practice valuation be reconsidered. The court wrote that because an independent value had to be assigned to the law license, the trial court “may wish to determine the value of defendant’s practice by a valuation method other than utilization of the death benefit provision of the partnership agreement. For example, the court may select a more realistic valuation method based upon defendant’s actual participation in an ongoing business enterprise rather than a method based upon defendant’s fictional death, i.e., utilization of the death benefit provision of defendant’s partnership agreement ....” 641 N.Y.S.2d at 781.

As a result of McSparron, use of the death benefit method may be appropriate only where no residual license value is involved, such as where the license is the separate property of the licensed spouse.

In a number of cases involving partners in the same large law firm, the Fourth Department held to the view that the value of the firm was fixed by the terms of the partnership agreement and no other method of valuation could be employed. SeeDignan v. Dignan, 156 A.D.2d 995, 549 N.Y.S.2d 539 (4th Dept. 1989), appeal dismissed 75 N.Y.2d 915, 554 N.Y.S.2d 832, 553 N.E.2d 1342. The Fourth Department held to this position even after the Court of Appeals in Amodio v. Amodio, 70 N.Y.2d 5, 516 N.Y.S.2d 923 (1987), supra, ruled that, while buy-sell agreements should be considered in valuation, such agreements are not conclusive. In Burns v. Burns, 84 N.Y.2d 369, 618 N.Y.S.2d 761, 643 N.E.2d 80 (1994), supra, the Court of Appeals held that, even as to law firm partnerships, agreements between the members are not conclusive on valuation. There, the law firm partnership limited the partners, upon withdrawal, to the value of their capital accounts. But that value is not determinative of the value of the partnership interest upon divorce since the attorney spouse would continue to be a productive partner in an ongoing enterprise.

In McElduff v. Mansperger, 214 A.D.2d 653, 625 N.Y.S.2d 594 (2nd Dept. 1995), the court confronted the situation where the parties operated a joint dental practice and then dissolved it, with each party operating a separate office. On these facts, there, in effect, was a choice as to the body of law to be applied: the principles of partnership law applied to actual partners or principles of equitable distribution applied to spouses who are implied economic partners. The court ruled that the parties, by their conduct, had elected to operate under partnership principles. By vacating the common dental office and taking certain patients and their charts with him, the husband (and by her apparent consent to these acts, the wife also) had achieved a dissolution and winding up of their actual partnership. In essence, the parties consented to a dissolution of the partnership and a division of the assets. Neither party could obtain another bite at the apple in the guise of equitable distribution.

It should be noted that, where a professional practice is commenced before the marriage, the practice may be separate and the non-professional spouse’s interest may be limited to the appreciation in value of the practice from the date of the marriage to the commencement of the action. SeeVan Ess v. Van Ess, 100 A.D.2d 848, 474 N.Y.S.2d 90 (2nd Dept. 1984).

The issues of the overlap between professional practices and professional licenses are considered in C236B6A, infra.
 
C236B6: Marital Property--Professional Licenses and Degrees

In the leading case of O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 746, 489 N.E.2d 712 (1985), the Court of Appeals held that a license to practice a profession, acquired during marriage and before the execution of a separation agreement or commencement of a matrimonial action, is marital property subject to equitable distribution. In so holding, the Court of Appeals resolved one of the most controversial issues under the Equitable Distribution Law and one which had divided the courts. The Court ruled that the fact that a professional license does not fit within the traditional view of property--for it lacks market value and cannot be sold, assigned or transferred--does not preclude treating the license as a asset of an economic partnership between spouses. The license, said the Court, is a valuable property right, a value reflected in the money, effort, and lost opportunities for employment expended in acquiring it and in the enhanced earning capacity it affords to its holder. That the license itself cannot be sold, assigned, or transferred presents no difficulties since a distributive award may be made in lieu of its actual distribution.

McSparron v. McSparron, 1995, 87 N.Y.2d 275, 639 N.Y.S.2d 265, 662 N.E.2d 745 (1995) resolved two major issues that the courts had grappled with since O’Brien was handed down: (a) what is the appropriate method for valuing the license where the licensed spouse has a history of actual earnings or a special career path which may affect the amount of his or her earnings; and (b) whether an award for the remaining value of a professional license may be obtained where the licensed spouse has established a career in the particular profession. This latter issue is separately discussed in Practice Commentary C236B:6A, infra.

Turning to the valuation issue, the O’Brien valuation methodology involved the comparison between the average income of a college graduate and the average income of a person engaged in the licensed profession over a working life-time. The difference between the average earnings was capitalized and then reduced to present value, with adjustments made for federal income taxes, inflation, and interest. O’Brien v. O’Brien, 114 Misc.2d 233, 241, 452 N.Y.S.2d 801, 805-806 (Sup.Ct. Westchester County 1982), affirmed as modified, 106 A.D.2d 223, 485 N.Y.S.2d 548 (2nd Dept. 1985), affirmed as modified, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 489 N.E.2d 712 (1985).

The use of the average life-time income of a person in the relevant occupation reflects the enhanced earnings opportunity generated by the license or degree. It tends to balance out other factors, such as individual intelligence, interest, contacts, and even luck. However, some courts were inclined to use the actual earnings or projected earnings of the licensed or degreed spouse, where there is an appropriate evidentiary foundation.

In McSparron v. McSparron, the wife obtained a medical license during the marriage and immediately before the commencement of the action. The license was readily classified as marital property, with the issue being how to value it. The trial court valued the license at $903,406, apparently based on the enhanced earnings the license would bring the typical physician. However, it was undisputed that the wife always intended to work on the staff of a health maintenance organization and would not earn as much as if she were employed elsewhere. According to her expert, the value of her license was $669,618. The Appellate Division, Third Department, held that the valuation approach of the wife’s expert should have been used since, in light of her undisputed intentions, her income would not reach the level which the husband’s expert used as a basis for his calculations. See 190 A.D.2d 74, 597 N.Y.S.2d 743 (3rd Dept. 1993). This determination was upheld by the Court of Appeals.

The use of an average income in the relevant practice area filters out, and balances out, the various factors at play in determining whether a license holder is more or less successful than others in the same profession. The incomes of license holders may vary over a work lifetime due to many factors, such as nature and location of employment, grades and accomplishments in school, family contacts, personality facets, good or poor work ethic, good or poor health, age and the effects of aging, among others.

In essence, McSparron took the factor of the nature of intended employment and made it determinative. That may be appropriate in cases where the non-titled spouse does not dispute the appropriateness and integrity of the titled spouse’s career choice or where the career choice has been long established. But the adoption of such an approach might be fraught with difficulty in cases where there were disputes over the career choice, such as where the career choice may have been declared in order to prejudice the titled spouse. For example, it may be a perfectly proper career choice for a new medical licensee to opt to work in a low-paying public health clinic, rather than pursue more lucrative private employment. But issues arise if the choice is made in anticipation of divorce litigation. If the choice is recognized and used in valuation, there is no assurance that once the case is over, the licensee will not move on. And, if a license is truly marital property, the selection of a career should not be the unilateral decision of one spouse, just as the selection of a pension option is not the unilateral decision of the employee spouse.

The extent to which McSparron erodes the use of the averaging approach is not easy to discern in view of the relative brevity of the Court of Appeals’ treatment of the issue in terms of the wife’s license and its general affirmation of the use of an overall average in its discussion of the valuation of the husband’s license. Nevertheless, as will be shown below, the Court of Appeals sustained the use of actual earnings when dealing with an older, established licensed spouse, and, therefore, it is consistent to use a measure, based on the actual, reasonable career plans and intentions of the licensed spouse when evaluating the worth of a new, or relatively new, license.

However license valuation is done, the focus is on the “enhanced earnings” that the license represents, i.e., the difference between the earnings made possible by the license and the earnings that the licensed spouse would have expected without the license. It is not sufficient to present only evidence as what income the license made possible. In Holihan v. Holihan, 159 A.D.2d 685, 553 N.Y.S.2d 434 (2nd Dept. 1990), the court held that the wife had failed to establish her claim that her husband’s license as a guidance counselor should be treated as marital. While the wife presented expert testimony as to valuation, her expert’s methodology failed to include a calculation of the earnings that the husband could have expected without the license.

In determining the value of a license or a degree, where the licensed or degreed spouse does not have a track record of established earnings in the occupation, a comparison is made between what the licensee spouse would earn over a lifetime in his or her original employment and the average lifetime income of a person holding the license, with the difference between the two, reduced to present value, being the enhancement of earnings. Thus, where the wife, who became a licensed nurse, had been a high-school graduate working in the clerical field, it was error to use as the baseline for her prior earnings the average earnings of a nurse’s aid, since the wife had never worked in that capacity. Morales v. Morales, 230 A.D.2d 895, 646 N.Y.S.2d 884 (2nd Dept. 1996); see alsoMcNally v. McNally, N.Y.L.J., May 19, 1997, p. 33, col. 1 (Sup.Ct. Queens County) (rejecting wife’s argument that the baseline value should be that of career which she had abandoned to become teacher and acquire teaching license). In Morales, the wife’s expert had used the nurse’s aid income as the baseline on the theory that the wife could have qualified to work in such a position prior to gaining her license. However, because the wife had, in fact, never worked in that occupation, to use the earnings of an employment in which she had never been engaged was speculative and not rooted in economic reality.

No award can be made in the absence of a showing that a spouse’s lifetime earnings were increased as a result of the license or degree. For example, if a spouse attains a degree in the arts in order to enhance his or cultural understanding and appreciation, the mere possession of the decree, without any showing of economic value, does not warrant an warrant. Thus, in Dugan v. Dugan, 238 A.D.2d 741, 656 N.Y.S.2d 769 (3rd Dept. 1997), where there was no showing that the wife’s earnings increased by reason of her attainment of a Master’s degree, it was proper for the court to deny the husband any award on account of the degree. In that particular case, it appeared that the wife had engaged in the same employment both before and after obtaining the degree, with no indication that the attainment of the degree was a occupational requirement.

In Greenfield v. Greenfield, 234 A.D.2d 60, 650 N.Y.S.2d 698 (1st Dept. 1996), an attempt was made by the careered spouse to have the amount of his student loans deducted from the value of his enhanced earnings. This attempt failed when the court concluded that the loans were incurred to fund the portion of his education and training that took place before the marriage and, which, therefore, was his separate property. Had the student loans been incurred to pay for the marital portion of the education and training, it might be fair to reduce the value of the enhanced earnings by the unpaid balance on the student loans. To be consistent, the value of the enhancement as of the valuation date should be reduced by the amount of the liability attributable to that asset as of the same valuation date. It would not be fair to reduce the remaining value of the enhancement by the original, full amount of student loans where any pay down of the student loans in the interval before the valuation date came from marital funds.

Note that in Mahoney-Buntzman v. Buntzman, 12 N.Y.3d 415, 881 N.Y.S.2d 369, 909 N.E.2d 62 (2009), the Court of Appeals held that the wife was not entitled to recoupment for marital funds used to make payments for the husband’s student loan, noting that the degree that the husband earned could have been subject to equitable distribution, if it had generated an economic benefit.

Cadet v. Cadet, N.Y.L.J., December 11, 1996, p. 31, col. 6 (Sup.Ct. Rockland County) involved the valuation of a medical license and board certification of a spouse who had no less than five separate and distinct sources of income. This spouse was truly hard-working, devoting in excess of 80 hours per week towards work, with 48 hours being devoted to two particular hospitals. The court did not find it appropriate to calculate the value of the license based over the licensee’s substantial work life based on the assumption that he would be continuing to work a 80 hour week. Rather, the court concluded that fairness required that the calculations be predicated upon a 48-hour workweek at the two hospitals where the licensee spouse was principally employed. This decision seems in keeping with the spirit of the Court of Appeals’ McSparron decision, i.e., that valuation issues be decided in the light of the practicalities of the case. It surely would be inappropriate to assume that a person would be working an 80 hour workweek for the entirety of his or professional career.

Where the licensed or degreed spouse acquired the license or degree partly before the marriage and partly afterwards, it is necessary to determine the percentage of the enhanced earnings represented by the license which constitutes marital property. In order to determine the proper coverture fraction, it is imperative that the evaluator keep in mind what is being valuated. Thus, where the comparison was between the spouse’s pre-marriage status as general medical practitioner and his post-marriage status as a specialist in internal medicine, it was not proper to base the coverture fraction on the entire period of undergraduate, graduate and post-graduate education the husband required to become an internist. Since all that was in issue was the enhancement due to the medical speciality, the proper fraction is derived by ascertaining the number of months that the parties were married during the period of speciality, not basic, training. Greenfield v. Greenfield, 234 A.D.2d 60, 650 N.Y.S.2d 698 (1st Dept. 1996).

That some portion of a license or degree was acquired by one spouse during marriage does not, by itself, entitle the other spouse to share in the enhanced earnings. For a spouse to receive an award on account of enhanced earnings it must be shown that he or she made a contribution to the licensed or degreed spouse or to the acquisition of the license or degree, which contribution makes it equitable for an award to be made. Thus, where the wife was in her last year of nursing school when the parties were married and the wife’s mother had paid her tuition and the wife herself had received a stipend, and the husband failed to show he made any substantial contribution to the wife’s acquisition of her nursing degree, the husband was not entitled to an award on account of the enhanced earnings attributable to the degree. Small v. Small, 227 A.D.2d 949, 643 N.Y.S.2d 842 (4th Dept. 1996).

The O’Brien case did not reach the question of whether an educational degree constitutes an item of marital property. However, the same logic applied to licenses by the Court of Appeals inO’Brien seems to apply to degrees. InMcGowan v. McGowan, 142 A.D.2d 355, 535 N.Y.S.2d 990 (2nd Dept. 1988), the Appellate Division took O’Brien to its logical conclusion, holding that if an educational degree can be shown to have value and was acquired during the marriage, then it, too, may be considered marital property subject to equitable distribution. McGowan held that there was no basis for drawing a distinction between the equitable distribution treatment of a professional license and that of an academic degree. Thus, McGowan held that a master’s degree acquired by the wife was marital property. See alsoAnderson v. Anderson, 153 A.D.2d 823, 545 N.Y.S.2d 335 (2nd Dept. 1989); Kalnins v. Kalnins, N.Y.L.J., November 16, 1989 (Sup.Ct. N.Y. County); Gross v. Gross, 160 A.D.2d 976, 554 N.Y.S.2d 699 (2nd Dept. 1990).

However, there was more to McGowan. In addition to the master’s degree, the wife also had acquired a teaching certificate, a certificate issued two weeks after the marriage. While the certificate was formally awarded after marriage, it was uncontradicted that the wife had fulfilled all of the requirements for the certificate prior to the marriage. The court declined to treat the certificate as marital property, holding that the real interest in the certificate, the wife’s knowledge and ability, was acquired before the marriage. That the certificate was formally bestowed thereafter did not make the certificate marital in nature. FollowingMcGowan, a number of decisions have held various types of certificates to be marital property, where acquired during marriage. Morimando v. Morimando, 145 A.D.2d 609, 536 N.Y.S.2d 701 (2nd Dept. 1988) (license as physician’s assistant); McAlpine v. McAlpine, 143 Misc.2d 30, 539 N.Y.S.2d 680 (Sup.Ct. Suffolk County 1989) (fellowship in society of actuaries).

McGowan was a clear-cut case where all of the work and study leading to the certificate had been done prior to marriage. Where the marriage takes place during the educational period, it may be necessary to prorate the asset based upon the relationship that the number of months of marriage during the educational period bears to the total number of months involved in the educational period.

The essential difference between the license and the degree is that the degree does not constitute authority to engage in any particular trade or profession. The degree merely represents a certification by an educational institution that the holder has successfully completed a given course of study. Nevertheless, at least certain degrees may, as a practical matter, enhance the earning capacity of the holder. If a particular degree in question can be shown to have an economic worth, then, under the expansive approach to marital property taken by the Court of Appeals in O’Brien, the degree should be considered marital property.

In Kessler v. Kessler, 212 A.D.2d 1038, 623 N.Y.S.2d 435 (4th Dept. 1995), the court offered some important guidance in the valuation of the enhanced earnings capacity of a post-graduate degree earned by a professional teacher. In the ordinary course of things, the enhanced earnings calculation consists of a comparison between the average earnings of a college graduate as compared to the average earnings of a person holding the advanced degree in question. But where teachers are concerned, school districts provide a formula for increasing the pay of teachers who have earned advanced degrees. InKessler, the Appellate Division held that it is the formula of the local school district which employs the teacher-spouse that should provide the valuation methodology. All it takes is calculating the difference between the salary the teacher-spouse earns with the degree and the salary that was earned without the degree. In Kessler, the use of this methodology resulted in a significant reduction in the valuation of the advanced degree (a Master’s degree in special education).

The Kessler approach seems sound where the parties always expected that the teacher-spouse would remain employed in the same, or an equivalent, school district. Use of the school district’s formula gives the parties exactly what the parties would have realized if the marriage had not splintered. On the other hand, the Kessler approach might be inappropriate where the teacher-spouse did not, or does not intend, to remain in the school district but to use the advanced degree in private industry or other form of more lucrative endeavor.

The well reasoned decision in Procario v. Procario, 164 Misc.2d 79, 623 N.Y.S.2d 971 (Sup.Ct. Westchester County 1994) makes a number of key points in dealing with the treatment of a professional license. In that case, the husband was a physician who completed a general surgical residency during the marriage. While the wife argued that the value of the husband’s degree had been enhanced by this specialty training, the husband maintained that completion of the residency merely made him eligible to take the test for board certification and that “eligibility” is valueless since he is unable to work as a general surgeon without the certification.

The court accepted the wife’s argument by drawing upon the analysis in the seminal O’Brien decision from the Court of Appeals. O’Brien established that whether an item constitutes marital property depends upon whether the item is a “thing of value”. Without the specialty training, the husband would have been only a general practitioner. If, with the training, the husband had a useable specialty that would generate more income, that is a “thing of value” and, if acquired during marriage, a marital asset. The absence of a formal diploma or certification is not determinative, as the parchment itself is not particularly valuable; it is the skill and learning acquired in the specialty that is the asset.

In Duspiva v. Duspiva, 181 A.D.2d 810, 581 N.Y.S.2d 376 (2nd Dept. 1992), the court held that an accounting degree and certification as a certified public accountant, both obtained during marriage, are marital assets subject to equitable distribution. Moreover, the court held that it was proper to calculate the value of the degree and certification by comparing the expected lifetime earnings of a similarly-situated worker with neither a degree nor a certification with those of a comparable certified public accountant and reducing this sum to present value. On the other hand, the court held that the nonprofessional spouse was entitled to share in the value of these assets since the professional spouse was the main support of the family at all times, the professional spouse pursued his studies largely unaided, and the nonprofessional spouse neither sacrificed her career nor assumed a disproportionate share of the household work as a consequence of the studies of the other spouse. In this regard,Duspiva is a useful reminder that, while a license or degree may be considered marital property, it does not automatically follow that the other spouse may share in the value of that property simply because there was a marriage. The court must always assess the relative contributions of the spouses and give consideration to the applicable statutory and non-statutory factors for the equitable distribution of marital property.

In Allocco v. Allocco, 152 Misc.2d 529, 578 N.Y.S.2d 995 (Sup.Ct. Monroe County 1991), the husband began a career in law enforcement with a suburban police department. In order to be appointed as a patrolman, and thereafter to be promoted up through the ranks he had to take and pass civil service examinations. While college study was not a prerequisite to promotion, the husband did obtain an Associate’s degree and a Bachelor’s degree, at about the same time that he successfully completed civil service examinations for promotion to sergeant and then to lieutenant. The court held that, while the husband’s degrees were not essential to the passing of the relevant examinations, his course of studies did enable him to pass and also helped him to acquire the necessary job skills and present himself favorably for interviews, which were factors in his promotions. Accordingly, it concluded that the degrees were marital property which enhanced the husband’s earning capacity because of the knowledge and skill represented by those degrees.

In Allocco, the wife’s expert valued the husband’s enhanced earning capacity by comparing the income of a police lieutenant (which the husband was) in the relevant police department with the income of a patrolman in that department. While this approach seems entirely appropriate, it reflects that the court may have unduly focused upon the husband’s degrees, rather than upon his status as a police lieutenant.

Usually degrees are valued by a simple comparison between the incomes earned by those who have such degrees and the incomes of those who do not. Yet, while the court in Allocco purported to be equitably distributing the enhanced earning capacities in the husband’s degrees, in actuality, it equitably distributed the enhancement of the husband’s earnings attributable to his employment as a police lieutenant. But since the husband had civil service and other rights in that position, it was the husband’s employment position, not the degrees, that should have been the focus of the legal analysis.

In Kyle v. Kyle, 156 A.D.2d 508, 548 N.Y.S.2d 781 (2nd Dept. 1989), the court held that uncompleted studies that might lead to a license are not to be treated as marital property. In Kyle, the husband was employed as a assistant school principal, had taken steps toward obtaining his principal’s license, but, at trial, was still two courses short of what he needed for the license. Since the husband had not completed the educational requirements for the license and did not acquire the license during the marriage, neither the non-existent license nor the partial work toward a potential license constituted marital property.

Had the husband obtained a license after the commencement of the action, the wife might have been able to argue that the value of the license should be prorated into the portion attributable to during the marriage efforts and the portion attributable to post-commencement efforts. Such an approach would have been permissible under McGowan v. McGowan, 142 A.D.2d 355, 535 N.Y.S.2d 990 (2nd Dept. 1988), supra. But since no license was ever obtained, the case simply could not be approached as a license case.

Some interesting cases deal with the issue of licenses and degrees that were obtained, but not used, during marriage. In Rosenberg v. Rosenberg, 155 A.D.2d 428, 547 N.Y.S.2d 90 (2nd Dept. 1989), the wife obtained a master’s degree in social work and a state certification. The wife had completed one-half of the course leading to the master’s degree prior to marriage and completed the remainder after the marriage. While the wife did work as a social worker for a few years after the marriage, she terminated those efforts completely after the birth of the parties’ second child. As a result, by the time the action was commenced, she had not worked as a social worker for some 10 years. While the court did not expressly rule that non-use of the license or certification necessarily precludes any award, the court rejected, as a matter of law, the expert valuation testimony offered by the husband. The husband’s expert was unaware of the wife’s previous earnings as a social worker and failed to provide the underlying figures upon which based a claim that the degree and certification would provide an enhancement of earnings to the wife. Moreover, the husband used the same expert to value his medical practice. Interestingly, this expert claimed that the wife’s dormant license and certification in social work were worth more than the husband’s 10 year old practice in internal medicine.

To be contrasted with Rosenberg is the decision in Savasta v. Savasta, 146 Misc.2d 101, 549 N.Y.S.2d 544 (Family Court Nassau County 1989). There, the husband’s license to practice medicine was regarded as his separate property on the ground that he had completed the requirements for that license, to all intents and purposes, prior to the marriage. After the marriage, the husband acquired, but did not use, a board certification in internal medicine. Instead, he worked solely as a physician in an emergency room. Indeed, after the commencement of the action, he acquired a board certification in emergency room medicine--a certification he could obtain by reason of his having worked in that field for the requisite length of time. The court declined to value the husband’s actual emergency room physician. While acknowledging that emergency room specialists earn more than general practitioners, the court noted that no degree, license, test or other activity is required for emergency room practice. Since the enhancement of earnings potential was due to simply working in the field, the court declined to view the enhancement by reason of emergency room specialization as relevant. On the other hand, the court found that the board certification in internal medicine was marital property, though the husband never used it. Since it was acquired during marriage through the husband’s direct efforts and the wife’s indirect efforts, it was an item of marital property. The board certification in internal medicine would result, if used, in an enhancement of the husband’s earning capacity (as internists earn more than general practitioners). While the husband did not use this potential, he still had it and could use it. The husband was still young enough that he could return to the internal medicine field if he so desired.

The wife argued that the court should adopt a requirement that the husband had to make the highest or best use of an available license. She relied upon the ability to earn cases, such as Hickland v. Hickland, 39 N.Y.2d 1, 382 N.Y.S.2d 475, 346 N.E.2d 243 (1976), cert. denied, 429 U.S. 941, 97 S.Ct. 357 (1976). Hickland held that a spouse is under an obligation to use assets and earning powers to maintain the marital standard of living. Hickland rejected a husband’s effort to reduce his support payments, predicated upon his earnings as an engineer, in light of his shift of employment to that of a subsistence farmer. Savasta declined to adopt a “best use” approach as a matter of law, but, instead, held that the earning potential to be assigned to particular license or certification is dependent upon the facts of each particular case.

The Hickland case does provide a relevant framework for analysis. In Hickland, the husband argued that the wife had acquiesced in his decision to become a full-time farmer. That argument was rejected by the Court on the facts presented. However, in Rosenberg, the facts would seem to support a finding that the husband had acquiesced in the wife’s non-use of her social work credentials. The wife’s decision to remain home with children and not pursue her social work career was a decision which the husband concurred in, or at least, did not object to. It was only upon the matrimonial action that he argued that the social work credentials should be recognized as having enhanced earnings potential. While such credentials might, indeed, have continuing value though not used for a lengthy period of time, any valuation of those credentials must take that period of disuse into account. Moreover, the economic loss sustained by the family unit from the non-use of the wife of her social work credentials would be offset, at the least, by the economic and non-economic benefits derived by the family from the wife’s efforts as homemaker and parent.

Savasta, however, does not fit this mold. In Savasta, the husband worked in the emergency room, and not as an internist, during the marriage. It does not appear that the wife objected to the husband’s decision to pursue the emergency room specialty. Having acquiesced in the selection of the one specialty, it would seem that it is too late in the day for the wife to insist that the husband’s career be valued on the basis of a specialty he had, but never used.

The issue has arisen as to whether a career, not pursued as the result of formal education culminating in a degree nor pursued with the sanction of a formal license, may nevertheless be regarded as an item of marital property capable of distribution. The issue is highlighted by Golub v. Golub, 139 Misc.2d 440, 527 N.Y.S.2d 946 (Sup.Ct. N.Y. County 1988). At the time of the marriage, the wife had already established herself as an actress and model of renown. After the marriage, the husband, a successful attorney, assisted her, through his legal and business skills, in enhancing her earnings and advancing her career. In the action, the husband asserted that, while the wife’s career commenced before marriage and was separate property, he was entitled to equitable distribution of the appreciated value of her career. The wife countered by arguing that, because her celebrity status was not one created by a profession or license, it could not be viewed as property subject to equitable distribution.

The Golub court noted that O’Brien recognized professional licenses as property subject to equitable distribution and that O’Brien logically extends to educational degrees. The Golub court determined that fairness required that a cognizable interest in a nonprofessional career should be viewed as a property interest subject to equitable distribution.

Golub is consistent with O’Brien’s emphasis on economic worth as the yardstick by which to measure whether an asset is sufficiently tangible to be viewed as marital property, as well as with O’Brien’s rejection of traditional property concepts as standards for equitable distribution. The key to O’Brien is the Court’s conclusion that the Equitable Distribution Law recognizes that “spouses have an equitable claim to things of value arising out of the marital relationship” and that these “things of value” need not necessarily “fall within the traditional property concepts”. 498 N.Y.S.2d at 746.

A professional license carries to the holder a capacity for enhanced earnings over a work lifetime. An educational degree, such as a master’s degree in business administration or an advanced law degree in taxation, carries to the holder a similar capacity for enhanced earnings. However, the important item is the recognition of skill and learning and the opportunity to advance within a field of endeavor, not the parchment which hangs on the wall. But, asGolub recognizes, there are many other fields of skill and learning which offer similar, if not greater, economic advantages and which require neither formal education not licensure in as a precondition for opportunity. It seems frail and arbitrary to make the availability of equitable distribution of an enhanced earning capacity, generated by the efforts of both spouses during marriage, dependent upon the presence of formal documentation. Indeed, O’Brien itself eschewed that type of formalistic analysis. Under the O’Brien rationale, the enhanced earnings potential of an acting and modeling career is a “thing of value” entitled to recognition under the statute. Where efforts of the parties, during marriage, have resulted in a demonstrated economic benefit, that benefit should belong to both, no matter the shape or form the asset takes. Indeed, it would be indefensible elitism and offensive snobbery to insist that the remedial O’Brien doctrine be restricted in its application to those involved in traditional service professions.

Elkus v. Elkus, 1991, 169 A.D.2d 134, 572 N.Y.S.2d 901, holds that a spouse’s career or celebrity status constitutes marital property subject to equitable distribution. In Elkus, plaintiff, an opera singer, had just embarked on her career, performing minor roles with the Metropolitan Opera Company. During the course of the marriage, her career progressed, her income increased, and she became an internationally renowned celebrity. Defendant was plaintiff’s voice teacher and coach and he claimed that he assisted plaintiff in her career endeavors. The Appellate Division, adopting the view articulated in the nisi prius decision in the Golub case discussed above, held that a spouse’s interest in a career, even though not documented by a license or degree, is a cognizable property right which is subject to the reach of the equitable distribution principles.

At root is the recognition that in the license or degree situation the valuable property right is in the enhanced earnings capacity that the license or degree enables the holder to achieve, not the actual paper document itself. That being the case, the presence or absence of a paper documenting a career is not the decisive factor as to whether an interest in a career is cognizable in equitable distribution. As noted above, the rule should be that where efforts of the parties, during marriage, have resulted in a demonstrated economic benefit, that benefit should belong to both, no matter the shape or form the asset takes. Another case that fits into this situation isMartin v. Martin, 200 A.D.2d 304, 614 N.Y.S.2d 775 (3rd Dept. 1994) which held that, where a spouse had acquired a law degree during marriage and had retired from service in the United States Congress, it was appropriate to distribute the value of the law degree, as enhanced by the congressional career.

Elkus involved a spouse who had embarked on her career prior to the marriage. Accordingly, the interest in that career constitutes marital property only to the extent that the value of the career appreciated during marriage. In Elkus, the determination of the extent of that appreciation in value was left to the trial court. Indeed, the posture in which Elkus reached the Appellate Division was an appeal from a pre-trial order holding the career not to be marital property. At trial, the non-career spouse will have to establish the value of the career at time of marriage, the value of the career at time of commencement of the action, and factors supporting an equitable distribution award. In a case where the career was in its infancy at time of marriage and a success later on, it may be that virtually all of the value in the career was created during marriage and it may not be terribly difficult to distinguish between the value at the start and the value at the end. However, substantial difficulty may be encountered where a spouse had a successful career at time of marriage since it may be less clear how much, if at all, the value of the career appreciated during marriage. It seems clear that expert testimony is critical to the proper determination of an enhanced earnings capacity claim.

To be factored into this equation is West v. West, 213 A.D.2d 1025, 625 N.Y.S.2d 116 (4th Dept. 1995), where the court held that the wife was entitled to an award based upon the value of her husband’s banking career. The court pointed to the wife’s failure to prove that the husband’s college degree was essential for his significant advancement. While the husband did attend an advanced school for banking, no degree was realized. While there are cases such as Elkus and Madori which have allowed recovery for advanced skills not evidenced by a degree, those cases involved occupations which, by their nature, require special training or experience. Elkus concerned an opera singer’s career andMadori centered on an emergency room physician. What was missing in West was any indication that a career in banking has any inherent value. For example, there was no indication that the husband specialized in any particular area of banking or that he had acquired skills that would enable him to earn more than any other banker. Elkus allowed an opportunity to establish that there was an enhanced value to an opera singer’s vocal career, while Madori recognized that an emergency room physician would earn more than a general physician.
 
C236B:6A: Marital Property--Avoiding Overlap Between Practice and License Awards

In applying O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 489 N.E.2d 712 (1985) to older licensees who have developed equity interests in professional practices or have established careers, the courts have focused on means for avoiding a double recovery for the nonprofessional spouse and a double payment for the professional spouse. The Court of Appeals has issued four decisions which deal with this question: McSparron v. McSparron, 87 N.Y.2d 275, 639 N.Y.S.2d 265, 662 N.E.2d 745 (1995); Grunfeld v. Grunfeld, 94 N.Y.2d 696, 709 N.Y.S.2d 486, 731 N.E.2d 142 (2000) and Holterman v. Holterman, 3 N.Y.3d 1, 781 N.Y.S.2d 458, 814 N.E.2d 765 (2004) and Keane v. Keane, 8 N.Y.3d 115, 828 N.Y.S.2d 283, 861 N.E.2d 98 (2006).

In the initial attempt to avoid making duplicate awards for license value and practice value, trial and intermediate appellate courts developed a doctrine that became known as “merger”. The merger doctrine had two separate branches. In its first and earliest branch, merger concerned itself with whether there is a double recovery if a professional’s license and actual practice are both valued and distributed. In its second version, some courts held that where a spouse’s license or degree is used in the course of a long career, the license or degree disappears as a distributable asset, even if the licensed or degreed spouse has no practice or business with equity.

In McSparron v. McSparron, 87 N.Y.2d 275, 639 N.Y.S.2d 265, 662 N.E.2d 745 (1995), the Court of Appeals held that the letter and the spirit of O’Brien was best served by the elimination of the concept of merger. While the Court made it clear that efforts must be taken to avoid duplication of recovery, it determined that the merger doctrine was too arbitrary and inflexible to provide a workable solution. Although McSparron involved the second branch of the merger tree (merger of license into nondistributable career), its rationale applies with equal force to the first branch (merger of license and practice).

In order to properly consider McSparron, it is appropriate to consider the particular facts involved. Each party in McSparron had a professional license. The wife had a medical license, the valuation issues concerning which have been discussed previously. The merger issue in McSparron involved the husband’s license to practice law.

While the husband’s law license was a marital asset, the Appellate Division, Third Department noted that the husband had worked for the State of New York for many years and was a career public servant. The court held that the license had merged into the husband’s career as a public servant and ceased to have any independent identity. And, significantly, the court declined to set any value on the husband’s career. As a result, under the Appellate Division’s rationale, the bottom line was that the husband received credit for an interest in the wife’s newly-minted medical license but the wife received no credit in the husband’s long-held law license. This was a strange, and avoidable, result.

On review, the Court of Appeals held that the merger doctrine should not be followed and remitted the case to the trial court for further proceedings so that the husband’s law license may be evaluated and considered as a marital asset. The Court found three separate reasons for its abolition of the merger doctrine.

First, since a professional license is a distributable item of economic value, there is no reason for that license not to retain its economic value throughout its existence. As the Court of Appeals wrote, “[i]t would be anomalous to suggest that a marital asset may ‘merge’ or disappear and perhaps re-emerge or reappear depending upon the vicissitudes of the licensee’s professional career”. 639 N.Y.S.2d at 270.

Second, the merger doctrine is difficult to apply since there is no clear yardstick for measuring when the practice or career has matured to the point where it has subsumed the license. The concept’s proper use is confusing where it is applied to the many situations in which the licensee spouse has experienced career reversals, has opted to change professional direction or has simply selected a career that does not square up exactly with the scope of the license. 639 N.Y.S.2d at 270. For example, if a police officer obtained a law degree in order to enhance the prospects for advancement in a law enforcement career, it would not seem appropriate, assuming that a merger doctrine is to be employed, to decline to find a merger because a law degree was merely helpful, rather than required. In the same vein, if an attorney-spouse had been employed in a law office for some time before election to Congress, presumably there would be merger under the merger doctrine. But it would be peculiar that election to Congress would bring about a reemergence, at least where there is no indication that the congressional spouse practiced law during the congressional career. SeeMartin v. Martin, 200 A.D.2d 304, 614 N.Y.S.2d 775 (3rd Dept. 1994), in which the court held that where a spouse had acquired a law degree during marriage and had retired from service in the United States Congress, it was appropriate to distribute the value of the law degree, as enhanced by the congressional career. The court found that because a law license is not a prerequisite to service in Congress, the license did not merge into a congressional career.

Third, the practical effect of the merger doctrine would be to limit the O’Brien rule to recently acquired licenses. That approach is inconsistent with the goal of assuring both spouses a fair share of all of the marital assets. Use of the merger doctrine favors the non-licensed spouse in a shorter marriage over a non-licensed spouse who is faced with re-building his or her economic life after the break-up of a long-term marriage. Under O’Brien, the enhanced earnings represented in the professional license or degree are those which will be generated over a work-life time, not just those that would have been generated short-term or until the time that it would be expected that the career would be established. Thus, an O’Brien non-licensee spouse may obtain a distribution based on the expected earnings of the licensee for life (discounted to present value), but where merger is found, the non-licensee spouse receives nothing on account of the future use of the license. This is unfair. 639 N.Y.S.2d at 270.

As a result of McSparron, the merger doctrine is abolished. It remains to consider how to value a professional license (or degree) where the licensee spouse has been engaged in gainful employment for an appreciable length of time or has an equity interest in a professional practice.

As noted above, the O’Brien methodology for valuing a newly-acquired professional license involves comparing the average lifetime income of a college graduate and the average lifetime income of a person holding the license and reducing the difference to present value. This methodology, in effect, measures the value of the opportunity presented by the license. However,McSparron teaches that where the licensee spouse has embarked on his or her chosen career and has a history of actual earnings, the theoretical valuation approach of O’Brien is to be discarded in favor of “a more pragmatic and individualized analysis based on the particular licensee’s remaining professional potential”. 639 N.Y.S.2d at 271. No longer is the measure the value of the opportunity offered to the licensee at the beginning of the career; now the focus is the value of what the licensee has done and can do with the career.

McSparron provides a clear guide to valuation of an older license or degree. The court should ascertain the average annual earnings of the spouse and multiply that average by the number of years remaining in the spouse’s work-lifetime. However, the result must be reduced by the remaining work-lifetime earnings that would have been realized without the license or degree. The amount of reduction must necessarily be determined by looking to the average annual earnings realized by a college graduate of similar age to the spouse and multiplying that amount by the spouse’s remaining work-lifetime. The difference between the spouse’s remaining actual earnings and the remaining earnings of a college graduate is then discounted to present value. The result is the remaining enhancement attributable to the license or degree. Where the license or degree is, in part, separate property, the enhancement must be reduced by the ratio which the separate portion of the educational or license process bears to the total educational or license process. See 639 N.Y.S.2d at 271. Thus, if it took four post-college years to acquire the license, and two of those years occurred prior to the marriage, the marital component of the license would be 50%. SeeSalzman v. Bass, N.Y.L.J., February 23, 1993, p. 26, col. 6 (Sup.Ct. Westchester County).

The use of the spouse’s actual earnings, rather than the average earnings of a person with the particular license or degree, is fairer to both spouses. The licensed spouse is not penalized if his or her earnings are below average; conversely, the non-titled spouse is not penalized if the licensed spouse has done better than average. This pragmatic approach also will reflect the career path actually chosen by the titled spouse, whether in practice, in employment by institutional or corporate entities or by the government. Certainly, a licensee is allowed, by way of illustration, to accept less remuneration as an employee rather than suffer the stresses, strains, and financial uncertainties inherent in operating his or her own practice. Where such a decision was accepted by the non-licensee spouse, it would be unfair, in a later matrimonial action, to value the professional’s license as if a private practice were possible. Indeed, it may even be said, at least in some instances, that even an employed professional has energized his or her license to the fullest extent possible under the circumstances. Indeed, without this pragmatic approach, the titled spouse would be economically second guessed over genuine career choices that people, and families, are allowed to make for themselves.

The use of actual earnings also eliminates the problems encountered where a spouse does not directly employ the license or degree. For example, a police officer obtains a law degree and license, not to practice law, but to enhance and further a career in law enforcement, such as to obtain an administrative or supervisory position. Even though the license has not been used to engage in law practice, the enhanced earnings resulting from the license and degree will be reflected in the actual earnings history of the spouse.

The use of the titled spouse’s actual earnings is appropriate where the spouse has embarked upon his or her career for a sufficient period to obtain an earnings history. Of course, where tax return information is insufficient or inaccurate, the court is not precluded by absent or inaccurate documentation from making its own determination as to what the titled spouse’s actual earnings are.

In Grunfeld v. Grunfeld, 94 N.Y.2d 696, 709 N.Y.S.2d 486, 731 N.E.2d 142 (2000), the Court of Appeals discussed the methods to be utilized in avoiding double-counting the same income stream for practice, license, and maintenance purposes. In that case, the trial court had calculated the amounts earned by the licensed spouse, the husband, above “reasonable compensation” to fix the value of the titled spouse’s professional practice and then used the “reasonable compensation” figure as the baseline for calculating the value of the husband’s professional license. However, rather than awarding the wife an interest in the license and reducing maintenance accordingly, the trial court made no award for the license and calculated maintenance based upon the husband’s entire future income. The Appellate Division modified by granting the wife an award for the value of the license but made no adjustment in the maintenance award. The Court of Appeals held that the Appellate Division had erred by double-counting the titled spouse’s future income stream for both license and maintenance purposes. The Court ruled that, to avoid the double count issue, the matrimonial court could reduce a distributive award that would be based on the same income as considered in fixing maintenance. The Court of Appeals noted that an advantage of this approach is that the maintenance award may be adjusted in the future if the licensed spouse’s actual earnings turn out to be less than expected at the time of the divorce. However, this method is not the only approach. It also permissible to avoid double counting by reducing the maintenance award. As the Court of Appeals noted, where the license is likely to retain its value in the future but the nonlicensed spouse may only be entitled to receive maintenance for a short period of time, it may be fairer actually to distribute the value of the license as marital property rather than to take the license income into consideration in determining the licensed spouse’s capacity to pay maintenance.

In Grunfeld, the Court of Appeals held that the Appellate Division had erred by directing that the nontitled spouse receive a share of the value of the titled spouse’s law license without making a corresponding adjustment in the maintenance award. On the other hand, it appeared that the trial court had not factored into the equation the fact that the titled spouse had unearned income, in addition to his earned income. There is no double counting to the extent that maintenance is based upon spousal income which is not capitalized and then converted into and distributed as marital property. Thus, if the trial court had fixed maintenance on the basis of the titled spouse’s income from all sources (adjusting for any appropriate setoffs), the proportionate share of maintenance attributable to his unearned income should have been excluded from the court’s calculation reducing the license value by the value of maintenance. In order to sort this issue out, a remand was directed.

On remand, the matrimonial court in Grunfeld concluded that, after the payment of maintenance, there was no residual value left in the husband’s law license and, thus, the wife was not entitled to a distributive award for her share of the law license. Grunfeld v. Grunfeld, 193 Misc.2d 418, 749 N.Y.S.2d 680 (Sup.Ct. New York County 2002). In reaching this conclusion, the court first focused on the income stream remaining untouched after the valuation of the practice. In Grunfeld, the parties did not argue that the baseline earnings should be counted as available; instead, both parties argued that the remaining income was the income that the husband would derive from various investments, including his share of the projected proceeds from the former marital residence. The court valued those assets at $1,165,000 and found that a reasonable rate of return (as of the time of trial) was no more than 9%. Hence, the court decided that the husband would earn no more than $104,850 each year from the investments. The court then had to decide whether the maintenance would be paid first out of unearned income (in which case there would more likely be a residual license value) or first out of earned income (in which case there would more likely be no residual license value). Rather than choose either extreme approach, the court decided to use a proportional method, under which the husband would pay maintenance out of projected unearned income in the proportion that such unearned income bears to the total income available to pay maintenance. In Grunfeld, the husband’s projected earned income represented 74% of his total available income and his unearned income represented 26% of his total available income. In calculating what the total available “earned” income was, the court looked to the baseline earnings of the husband excluded, as reasonable compensation, from the capitalization of income in the assessment of the value of the husband’s practice.

As of the time of trial, the value of the maintenance award was $1,058,000. If 74¢ out of every dollar paid for maintenance is from the law license, then $782,920 would be paid from earned income, and $275,000 would be paid from unearned income. Since the monies expected to be paid from the law license toward maintenance ($782,920) exceed half of the value of the law license (established at $773,500), there was no residual value in the law license to be distributed as part of equitable distribution.

Consequently, the answer to the double-count problem seems to lie in the basis of the valuation of the practice. In valuing a practice, like any other business, the key is what a willing buyer would pay to a willing seller in an arm’s length transaction. If the asset is capable of sale, it might be sold; if it is not capable of sale, a discount for lack of marketability would be appropriate. In either event, the sale proceeds, or the appraised value, assuming the asset to be marital, would be distributed between the spouses. Once that is done, the spouses have parted company with the asset, and it and the income it produced are no longer available to them. For example, if one spouse owned a gas station and, to accomplish equitable distribution, the gas station was sold and the proceeds divided, the station’s income would no longer be available to either party.

After sale of a business, the selling spouse would, if physically able, have the ability and obligation to obtain employment. Thus, in the example used above, the seller of the gas station, while no longer having his or her own station to work in, could obtain employment at another station, assuming that no restrictions on competition would be imposed in the sale of the station. However, the remuneration that would be available in the market place might or might not be comparable to the earnings generated through ownership of the station.

These same principles would seem to apply with equal force to professional practices. While no sale is actually occurring, the valuation methodology, in effect, assumes that the interest in the practice has been fully disposed of. In the valuation of the practice, an assessment is made of the value of the tangible assets, as well as the value of goodwill, which takes into account the value of the earnings that the practice generates. Since those earnings have been factored into the value of the practice, such earnings must then be excluded from the value of the remaining license. In other words, the income used in determining the present value of the practice must be deducted from the calculation of future enhanced earning capacity.

Thus, as made evident by Grunfeld, the capitalization of earnings method of practice valuation may prove of great utility. In using that method, the goodwill value of the practice is measured by the extra income generated in excess of reasonable compensation. The professional spouse’s earnings over what would be reasonable compensation, based on his or her training and experience, represents the goodwill component of the practice. Since only the excess over reasonable compensation is used to measure the value of the practice, there is no double count if the reasonable compensation figure is utilized for residual license valuation. The reasonable compensation figure may then be applied to the licensee’s remaining work-lifetime and the residual value of the license calculated.

Use of the reasonable compensation figure has another advantage in terms of candor in expert testimony. If no license award is to be made, the lower the reasonable compensation figure, the better for the non-titled spouse, since the lower the reasonable compensation, the higher the excess compensation, and the higher the value of the practice. But a low reasonable compensation figure, if used for residual license valuation, would produce a low license valuation. Conversely, the titled spouse has an incentive, in terms of practice valuation, to push for a higher reasonable compensation figure. But that incentive is mitigated if the higher reasonable compensation figure is used for residual license valuation.

In Keane v. Keane, 8 N.Y.3d 115, 828 N.Y.S.2d 283, 861 N.E.2d 98 (2006), the Court of Appeals held that the issue of double-counting is a concern only where the property in question is of an intangible nature, such as a professional license or degree or the goodwill aspects of a business (as distinguished from the “hard assets”, such as furniture and equipment). The Court ruled that, where tangible assets are concerned, it is not a double-count to award one spouse title to a tangible asset but consider the income produced by that asset as available for the payment of maintenance to the other spouse. In the case that reached the Court, the husband received in equitable distribution property, held in the name of a corporation in which he owned all the stock, that was leased to a automobile body shop. The Court held that the rental income derived from the automobile body shop lease was available for the payment of maintenance. The Court reasoned that, while intangible assets (such as a professional license or business goodwill) have no independent existence separate and apart from the income that is generated from the assets, tangible property is different. In particular, the Court stated that the property would have an independent existence, as a marketable asset. In the same case, the husband’s corporation also had an interest in a mortgage note which produced monthly income. The Court held that it was proper not to count the income from the mortgage for maintenance purposes as the payments themselves were the marital asset.

In the fourth of the Court of Appeals’ cases, Holterman v. Holterman, 3 N.Y.3d 1, 781 N.Y.S.2d 458, 814 N.E.2d 765 (2004), the Court addressed the issue of double-counting as it relates to child support. In Holterman, the Court ruled that there should not be any adjustment in child support on account of distributive award payments to be made to pay the custodial parent for her share of the future enhanced earnings attributable to the noncustodial parent’s medical license. The majority of the Court held that, under the Child Support Standards Act, the payment of a distributive award is not a recognized deduction and the receipt of a distributive award is not a recognized category of income. The Court stated that this legislative treatment is understandable, since distributive awards reflect a property distribution, not income. The Court also ruled that an adjustment would be unworkable because it would skew child support awards in instances where property settlements are being implemented by payments over time, rather than by a lump sum payment or transfer of other assets. TheHolterman court distinguished McSparron and Grunfeld, holding that those cases involved maintenance, which, unlike child support, is not governed by a precise statutory formula. While the court in Holterman acknowledged that an obligation to pay a distributive award is a factor that may be considered in deciding whether the statutory formula produces a result that is “unjust or inappropriate,” the Court, on the facts presented, held that it was not an abuse of discretion to adhere to the use of the statutory formula. Moreover, the Court noted that, if the child-support award had placed an unfair economic burden on the husband, the lower courts could have reduced his maintenance obligation or the wife’s share of the license value, but they did not do so. Two dissenting judges argued that the majority had applied the statutory formula in a wooden manner that led to injustice.
 
C236B:7: Marital Property--Pension and Retirement Benefits

In Majauskas v. Majauskas, 61 N.Y.2d 481, 474 N.Y.S.2d 699, 463 N.E.2d 15 (1984), the Court of Appeals held that vested or matured rights in a pension plan, whether the plan is contributory or not, are marital property, to the extent that the rights result from employment time after the marriage and to the date of the commencement of a matrimonial action. 474 N.Y.2d at 704. The Court viewed these pension rights as a form of compensation taken in lieu of cash which would have enhanced the marital assets or the marital standard of living. Id. at 704-705.

The Court rejected the contention that because the husband’s employment (and the accruing of pension rights) commenced before the marriage, the pension should be regarded as separate property. The Court ruled that the reference in one of the statutory factors that serve as guides in making an equitable distribution award to the “loss of inheritance and pension rights” upon dissolution must be read as speaking to the non-employee’s loss of independent rights in the other party’s pension, which rights would not exist if the property was separate. 474 N.Y.S.2d at 705. The Court also affirmed the methods by which the value of the pension was calculated, apportioned, and to be paid out. Id. at 706.

Masjauskas dealt with pension rights that had been vested, i.e., the employee would receive payments even if employment ceased and a death benefit might be payable in the event of his death. The Court of Appeals has since extended Masjauskas by holding that the absence of vesting does not preclude the equitable distribution of a pension or retirement account. In Burns v. Burns, 84 N.Y.2d 369, 618 N.Y.S.2d 761 (1994), the Court ruled that the value of a pension cannot reasonably be deemed to accrue only at the instant that vesting occurs. It would be unrealistic to conclude that rights in a pension plan are not accumulated through years of employment but only spring up suddenly at the moment of vesting. The Court of Appeals recognized that a nonvested pension is earned gradually during marriage. Burns suggests two approaches to the valuation and distribution of a nonvested pension. The first approach is to calculate the present cash value of the pension, with a discount, where appropriate, for lack of vesting. The second approach is to allocate a portion of each future payment to the nontitled spouse. The Court of Appeals suggested that this latter approach be used only where the present value of the nonvested pension can be ascertained. It may also be appropriate to use the pay-out approach where there is not enough cash, or other assets, which the employee spouse can use to pay the non-titled spouse for his or her share of the pension. It is also appropriate to keep tax considerations in mind, since pension plan payments will be taxed when made after retirement, and an immediate payment for a share of the present value of the pension will not be subject to tax.

In the Majauskas case, supra, the Court of Appeals noted that, because marital property is that which is acquired before marriage and before the execution of a separation agreement or commencement of a matrimonial action, it is necessary to winnow out from the marital aspect of a pension plan interest, plan rights attributable to earnings before marriage and those attributable to earnings after the commencement of the action or execution of a separation agreement. This may be accomplished by comparing the number of months from the date of the marriage to the date of the commencement of the action (or execution of a separation action) as against the total number of months of employment.

Rights earned subsequent to the commencement date are not marital property. E.g., Majauskas v. Majauskas, 61 N.Y.2d 481, 474 N.Y.S.2d 699, 463 N.E.2d 15 (1984), supra; Marcus v. Marcus, 135 A.D.2d 216, 525 N.Y.S.2d 238 (2nd Dept. 1988). Thus, where a spouse keeps working after the commencement date, rights earned as a result of that work are not marital. But not all accretions in a pension plan are due to continued employment; at least some are attributable to passive investment income on the portion of the fund previously earned and invested. The non-employee spouse is entitled to have the passive appreciation in the marital portion of the pension fund treated as marital property. Glasberg v. Glasberg, 162 A.D.2d 586, 556 N.Y.S.2d 772 (2nd Dept. 1990); Glass v. Glass, 177 A.D.2d 807, 576 N.Y.S.2d 421 (3rd Dept. 1991). The situation is analogous to treating interest earned post-commencement on a marital bank account as marital property.

Note that in Dolan v. Dolan, 78 N.Y.2d 463, 577 N.Y.S.2d 195, 583 N.E.2d 908 (1991), the Court affirmed a determination that the nonemployee spouse was entitled to a percentage of any future increase in the monthly pension payment, as well as retroactive pension payments from the date of commencement of the action. This would seem to indicate the Court’s agreement that non-employees are entitled to share in post-commencement appreciation in the marital portion of a retirement plan.

It is also important to distinguish disability pensions from retirement pensions. The Court of Appeals, inDolan v. Dolan, 78 N.Y.2d 463, 577 N.Y.S.2d 195, 583 N.E.2d 908 (1991), teaches us that, in order to properly consider a claim for equitable distribution of a spouse’s disability pension, it is necessary to distinguish between the portion of the pension that represents deferred compensation and the portion that represents compensation for personal injuries. To the extent that a disability pension is compensation for personal injuries, it is separate property. See DRL § 236, Part B, subd. 1[c]. Only to the extent that a disability pension reflects deferred compensation is it marital property. SeeWest v. West, 101 A.D.2d 834, 475 N.Y.S.2d 493 (2nd Dept. 1984); Newell v. Newell, 121 Misc.2d 586, 468 N.Y.S.2d 814 (Sup.Ct. Queens County 1983).

In Dolan v. Dolan, supra, the husband was a sanitation worker for a municipality. After nine years of employment, he injured his back when he fell from a sanitation truck. Eventually, he retired on an ordinary disability pension. At the time of his retirement, he had accumulated approximately 11 years of service.

Examination of legal principles governing the municipal pension in which the husband participated made it clear that he was being compensated for his length of service to the municipality in addition to being compensated for his personal injuries. The Court of Appeals ruled that, to the extent that the disability pension represented deferred compensation, it was indistinguishable from a retirement pension and, therefore, subject to equitable distribution. 78 N.Y.2d at 468, 577 N.Y.S.2d at 197. However, to the extent that the employee was being compensated for personal injuries, that compensation is separate property.

In Dolan, expert testimony was adduced from which the trial court was able to conclude that 47.62% of the disability pension was due to deferred compensation and 52.38% was compensation for personal injuries. Because the court had broken out the marital property component, the award to the nonemployee spouse of 50% of the marital component--23.81% of the total--was affirmed.

Dolan did not specifically address which party has the burden of proof and there are respectable arguments on both sides. There is a presumption that property acquired during the marriage is marital; on the other hand, a disability pension, on its face, appears to have a substantial separate property component. In Parrish v. Parrish, 213 A.D.2d 928, 623 N.Y.S.2d 955 (3rd Dept. 1995), the court held that the burden of proof is on the party claiming that the pension is separate property. In that case, the parties each presented experts and the court found that neither expert was credible. The court held that since there was no reliable evidence of what was the separate property component, the entire pension would be viewed as marital. The Second Department agrees, holding that the presumption is that the entire disability pension is marital, with the burden being on the titled spouse to prove to the contrary. Howe v. Howe, 68 A.D.3d 38, 886 N.Y.S.2d 722 (2nd Dept. 2009).

In general, the non-employee spouse claiming an interest in a pension must establish that there is a plan and what the marital portion is. Grenier v. Grenier, 210 A.D.2d 557, 620 N.Y.S.2d 139 (3rd Dept. 1994). Parrish is not inconsistent with that general rule. Once the non-employee spouse shows that there is a pension plan and establishes the portion generated by marital employment, he or she has met the burden. If the employee wishes to avoid equitable distribution of the pension rights earned during marriage, such as by claiming that some portion is compensation for personal injuries, it is up to the employee to show the applicability of the separate property exception involved.

All this being said, as the Second Department ruled in Howe v. Howe, 68 A.D.3d 38, 886 N.Y.S.2d 722 (2nd Dept. 2009), the courts can readily direct an appropriate distribution, preserving the disability portion separate, by use of a qualified domestic relations order. This aspect ofHowe is considered further infra as part of the discussion of qualified domestic relations orders.

There is disagreement as to whether social security disability payments are marital property subject to equitable distribution. The Appellate Division, Third Departments, holds that social security disability payments are, to the extent that such payments represent deferred compensation, marital property. Wiercinski v. Wiercinski, 116 A.D.2d 789, 497 N.Y.S.2d 179 (3rd Dept. 1986). However, the Appellate Division, Second Department disagrees, holding that social security benefits are not a pension and are entirely exempt by federal law from being subject to equitable distribution. Wallach v. Wallach, 37 A.D.3d 707, 831 N.Y.S.2d 210 (2nd Dept. 2007); Principe v. Principe, 229 A.D.2d 522, 644 N.Y.S.2d 1005 (2nd Dept. 1996); Thomas v. Thomas, 221 A.D.2d 621, 634 N.Y.S.2d 496 (2nd Dept. 1995). The Thomas case acknowledges that social security benefits may be considered in connection with the issue of maintenance.

In Olivo v. Olivo, 82 N.Y.2d 202, 604 N.Y.S.2d 23, 624 N.E.2d 151 (1993), the Court of Appeals held that postdivorce retirement incentives are not marital property, except to the extent that such incentives enhance pension benefits attributable to the pre-divorce marital period.

Olivo involved an employer who, to induce older, long-term employees to retire, offered three incentives: (1) an enhanced retirement income benefit providing 100% of the employee’s pension though the employee was not yet eligible for same; (2) a social security bridge payment to provide the employee with payments equal to the expected Social Security payments, with the employer to make the payments from date of the employee’s retirement to the date of the employee’s eligibility for Social Security; and (3) a separation payment.

In the two cases decided under the Olivo caption, the employee spouses accepted the package and had previously been divorced under judgments which entitled their former spouses to a pro rata share of retirement benefits. The question before the Court was what was to be included in the calculation of those benefits.

The Court held that if the rights to all three forms of retirement incentive compensation were earned in part during the marriage, the former spouses would be entitled to share in them pro rata. However, in the cases, the employer’s package was not deferred compensation attributable to work done during marital years but was consideration for a post-divorce agreement to leave the work force. The non-employee spouses argued that the employee spouses were eligible to participate in the plan only because of the seniority acquired during the years of service during marriage. The Court ruled, however, that length of service is relevant to deciding whether compensation is deferred compensation or a disability award, an issue not presented here. Here, the social security bridge payment and the separation payment are not marital because they are not forms of deferred compensation. The employees had no rights to such payments during the marriage; had they retired the day before the plan was offered, they would not have gotten anything.

The enhanced retirement income, however, stood on a different footing. The pension was marital property. The Court of Appeals held that, as marital property, the pension was joint property and was subject to modification by actions of employee. The Court suggested that if the employed spouse retires early, both parties get smaller benefits.

It must be remembered that, where both spouses are employed, the pension issue is a two-way street. In Kobylack v. Kobylack, 96 A.D.2d 831, 465 N.Y.S.2d 581 (2nd Dept. 1983), the Appellate Division found it error for the trial court not to have awarded the wife a percentage of the husband’s “Thrift Fund” and modified so as to award her a share. However, the wife had pension rights and the Court of Appeals remanded the case to the Appellate Division in order to obtain the reasons why the wife’s pension rights were not distributed. 62 N.Y.2d 399, 477 N.Y.S.2d 109, 465 N.E.2d 829 (1984).

In the equitable distribution of pension and retirement benefits, efforts of the non-employee spouse must be addressed at not only obtaining an award but at assuring its enforceability. Where the pension or retirement plan is subject to the federal Employment Retirement Income Security Act (popularly known as “ERISA”), federal law establishes the conditions to be followed to insure enforceability.

Private pension plans are heavily regulated through ERISA. ERISA contains requirements that private plans contain spendthrift and anti-alienation provisions and, at one time, there was at least some question as to whether state divorce courts could intervene, in apparent contravention of federal law, to require an equitable distribution of a private, ERISA-governed pension plan benefit. There was substantial federal and state authority to the effect that ERISA did not preempt state divorce courts from directing an equitable distribution of an ERISA governed private pension plan. See, e.g., Carpenters Pension Trust for Southern California v. Kronschnabel, 632 F.2d 745 (9th Cir. 1980), certiorari denied 101 S.Ct. 3159, 453 U.S. 922 (1981); Glasberg v. Glasberg, 104 A.D.2d 788, 480 N.Y.S.2d 131 (2nd Dept. 1984). However, through the enactment of the Retirement Equity Act of 1984, Congress has acted to eliminate the problem, but also to regulate and restrict the equitable distribution of private pension plan benefits by state divorce courts.

Under the Retirement Equity Act of 1984, P.L. 98-397, enacted August 23, 1984, qualified domestic relations orders (“QDROs”) are exempted from the anti-alienation restrictions imposed by ERISA. The state court’s order or judgment will be enforceable only if it constitutes a QDRO. If an order does qualify, it can insure its own enforceability by requiring the plan administrator to separate a designated portion of the employee spouse’s account into a separate account for the non-employee spouse. If this is done, the non-employee spouse may elect to exercise such options as are available under the plan as to his or her portion and is not affected by such options as the employee may elect for the employee’s portion. This approach has the advantage of avoiding having to withdraw money from any accounts (and risk having to pay taxes at that time of the withdrawal). It also avoids having to leave one spouse with the pension and having to balance out the scales by awarding other assets to the nonemployee spouse. It also avoids having to rely on the spouses to stay in touch with each other and cooperate in sharing pension checks at a later date.

A domestic relations order, under the federal statute, is any judgment, decree or order (including an order approving a property settlement agreement) which relates to the provision of child support, alimony payments or marital property rights of a spouse, former spouse, child or other dependent of a plan participant and which is made under a state domestic relations law. A domestic relations order will be treated as a qualified domestic relations order if: (a) it creates or recognizes the existence of an alternate payee’s right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to participant under a plan; and (b) meets certain technical requirements. The order must clearly specify: (1) the name and last known mailing address of the participant and of each alternate payee covered by the order; (2) the amount or percentage of the participant’s benefits to be paid by the plan to each alternate payee or the manner in which the amount or percentage is to be determined; (3) the number of payments or period to which the order applies; and (4) each plan to which the order applies. To qualify under the statute, the domestic relations order must not: (a) require a plan to provide any type or form of benefit or any option not otherwise provided; (b) require the plan to pay increased benefits (determined on the basis of actuarial value); and (c) does not require the payments of benefits to alternate payee which are required to be paid to another alternate payee under another qualified domestic relations order. In general, it is permissible for a qualified domestic relations law to require, where the participant in the plan has not been separated from service, that payments be made to an alternate payee on or after the date the participant attains the earliest retirement age, as if the participant had retired on that date that payment is to begin, and in any form in which benefits may be paid under the plan to a participant (except for a joint and survivor annuity with respect to the alternate payee and his or her subsequent spouse). 29 U.S.C.A. § 1056(d)(3)(A), as amended.

While it is now well known that QDROs may be used to achieve equitable distribution of retirement benefits, other uses of QDROs are less well known. For example, it is permissible to utilize a QDRO to aid enforcement of judgments for attorneys’ fees incurred in connection with efforts to compel compliance with child support obligations. Adler v. Adler, 224 A.D.2d 282, 638 N.Y.S.2d 29 (1st Dept. 1996). Issuance of a QDRO has even permitted prior to entry of a divorce judgment as a means to enforce existing support and counsel fee awards, to provide security for compliance with the support order, and to provide funds to enable the supported spouse to pay the income taxes that will be generated by the premature withdrawal of the funds from the retirement account once rolled over.Renner v. Blatte, 170 Misc.2d 579, 650 N.Y.S.2d 943 (Sup.Ct. New York County 1996).

Where an ERISA-governed plan is not involved, the non-employee must take care to protect his or her interests. Very often, governmental plans contain various options, some of which would be advisable from the employee’s perspective and highly inadvisable from the viewpoint of the non-employee spouse. But these governmental plans now often contain provisions for obtaining qualified orders which the plan administrator will recognize and enforce in much the same way that ERISA’s QDROs operate. For example, the New York Comptroller, who is the sole trustee of New York State retirement plans, has developed a system modeled on the federal QDRO system.

In Kaplan v. Kaplan, 82 N.Y.2d 300, 604 N.Y.S.2d 519, 624 N.E.2d 656 (1993), the Court of Appeals overturned an earlier precedent and held that the provisions of law prohibiting assignment of benefits under the teachers’ retirement system do not bar assignments of such benefits to a spouse or former spouse incident to a separation agreement or a divorce. The Court noted that the purpose of such prohibitions is to protect public employees from the consequences of improvidence or misfortune that might enable creditors or assignees to reach the funds. The stated purpose is to make sure funds are preserved for use of the pensioner and those legally dependent on him or her for support. It is not fair to equate the marital distribution rights of the employee’s spouse to the rights of a general creditor. Pension benefits are marital property to extent earned during coverture and the non-employee spouse has an equitable interest therein that should not be frustrated by the anti-assignment provisions.

The courts are available to resolve any disputes in obtaining a proper order. In McDermott v. McDermott, 119 A.D.2d 370, 507 N.Y.S.2d 390 (2nd Dept. 1986), appeal dismissed as moot, 69 N.Y.2d 1028, 517 N.Y.S.2d 938, 511 N.E.2d 81 (1987) involved was a New York City firefighter’s pension plan which offered options to the employee whereby the employee could receive higher annual payments but less would be available to designated beneficiaries at the death of the employee. In McDermott, a divided Appellate Division held that the courts have the power to restrict the options that the employee may choose from and to compel that the non-employee spouse be irrevocably designated as beneficiary to the extent of his or her interest. The McDermott decision gives meaningful recognition to the interest of the non-employee in the retirement plan. Because the non-employee is treated as an owner of the plan, to the extent of the interest afforded in equitable distribution, the employee, with equivalent ownership status, should not be allowed to unilaterally control the options selected. If the parties cannot agree, the courts properly should act to protect the rights of both.

The courts appear to have the discretion to take action to prevent the employee spouse from defeating the rights of the non-employee. See Farsace v. Farsace, 97 A.D.2d 951, 468 N.Y.S.2d 751 (4th Dept. 1983). In Ferriera v. Ferriera, 112 A.D.2d 22, 490 N.Y.S.2d 389 (4th Dept. 1985), the court recognized that it was beyond its power to order the employer to take no action to impede or impair the rights of the non-employee spouse. However, it ruled it appropriate to compute the non-employee’s share of each periodic pension payments as though the employee had opted for highest periodic payment during his lifetime. While the employee had the right to select an option which would provide a survivorship benefit but reduce his lifetime payments, the non-employee’s rights, appropriately, were insulated from the adverse effect of such a decision. Under the federal ERISA statute, discussed below, such problems are avoided in a different way. The interest in the plan is actually divided in two and each spouse may elect a plan option for his or her portion of the plan interest.

It should be that there is language in the Court of Appeals’ decision in Olivo v. Olivo, 82 N.Y.2d 202, 604 N.Y.S.2d 23, 624 N.E.2d 151 (1993), which casts some doubt on the ability of the courts to regulate pension choices made by employee spouses. The Court stated, in referring to pension elections, that: “[t]he employee is of course free to do so, even though it incidentally and adversely affects the other party’s rights, and the nonemployee spouse would have no grounds for recovery of the ‘loss’.” 82 N.Y.2d at 209-210, 604 N.Y.S.2d at 27.

The consequences of a failure to protect the rights of the non-employee can be catastrophic. In McDermott v. Police Pension Fund, 133 Misc.2d 669, 507 N.Y.S.2d 786 (Sup.Ct. N.Y. County 1986), the judgment of divorce awarded the wife an interest in her husband’s police pension. However, following the divorce, the husband elected to take the “death gamble” plan option. Under that option, he received large advance payments prior to finalization of his pension but his beneficiaries would receive no payments if he died prior to finalization and first regular pension payment. Moreover, the husband designated his children as beneficiaries, rather than following the judgment by designating his wife. The husband died within a year of retirement and, as a result of the death gamble, his beneficiaries received nothing. The wife’s effort to enforce the judgment against the police pension fund was rejected. The court held that the appropriate authorities were never notified of the divorce judgment or of the wife’s interest in the plan. The court suggested that the attorneys who represented the wife and who failed to place the fund on notice might bear some of the responsibility for the wife’s plight.

A similar situation--and similar result--obtained in Weizenecker v. Weizenecker, 140 A.D.2d 517, 528 N.Y.S.2d 606 (2nd Dept. 1988). The husband, a participant in the New York State Employees’ Retirement System, designated relatives as his beneficiaries. In a later separation agreement, incorporated into a divorce judgment, the husband agreed to irrevocably designate the parties’ son as beneficiary. However, he died without ever having changed the beneficiaries. The Appellate Division, relying upon earlier Court of Appeals precedent, held that an employee of a civil pension system may not effectively agree in a separation agreement to designate irrevocably a beneficiary of benefits payable on death. Instead, the retirement system is bound by the last valid designation on file. However, if the employee breached the provisions of the separation agreement, a contract claim may be asserted against the estate.

The lesson in this is to request the court to limit options and beneficiary changes by express provision in the judgment. The judgment should then be served upon the pension or retirement plan administrator, to put the plan on notice of the rights of the non-employee beneficiaries and the limitations imposed upon the rights of the employee to elect options or change beneficiaries. A failure to do so may result in the rights granted in the plan to the non-employee being rendered largely, if not entirely, illusory.

Where ERISA or other pension plan provision does not prevent it, the court may award a pension interest to a nonemployee spouse by directing that payments to the non-employee be made “as, if, and when” received by the employee or may provide for a distributive award. SeeMajauskas v. Majauskas, supra; Weinstock v. Weinstock, 114 A.D.2d 450, 494 N.Y.S.2d 361 (2nd Dept. 1985). It has been said that where the amount that the non-employee will receive is small and there is other marital property, distribution to the non-employee of the present value of a pension interest is preferable. Armando v. Armando, 114 A.D.2d 875, 495 N.Y.S.2d 192 (2nd Dept. 1985). This may be accomplished by withdrawal of money from the plan fund (where permissible under an ERISA regulated plan) or offset against other property. Kobylack v. Kobylack, 111 A.D.2d 221, 489 N.Y.2d 257 (2nd Dept. 1985). However, it should be noted that preretirement withdrawals may have adverse tax consequences and, therefore, should be avoided.

Equitable distribution may not be directed where marital status relief is denied and the parties remained legally married. Thus, where the granting of a divorce is reversed on appeal, the provisions of the judgment pertaining to equitable distribution must also be vacated. Matthews v. Matthews, 238 A.D.2d 926, 661 N.Y.S.2d 115 (4th Dept. 1997). This point was taken further in Schildkraut v. Schildkraut, 240 A.D.2d 649, 659 N.Y.S.2d 489 (2nd Dept. 1997). There, the husband was granted a divorce by the trial court and provisions for equitable distribution were made. The wife appealed and the Appellate Division reversed the judgment and dismissed the complaint. While the appeal was pending, however, the husband transferred to the wife, pursuant to the equitable distribution portion of the divorce judgment, proceeds of his retirement account. After the divorce was undone, the husband sought the return of the funds from the retirement account. The Appellate Division held that the trial court acted properly in granting the husband’s request. In short, the wife could not have it both ways; she could not resist the divorce yet retain the equitable distribution award made possible by the divorce judgment.

Cost of living adjustments (COLAs) and variable supplement fund (VAF) benefits are to be included in a qualified domestic relations order (QDRO) as part of a pension distribution, even if the agreement or court decision does not specifically cover them, since such adjustments and benefits are merely supplements to the pension asset. Pagliaro v. Pagliaro, 31 A.D.3d 728, 821 N.Y.S.2d 602 (2nd Dept. 2006). This is an exception to the general principle that a QDRO can only convey those rights that are granted in the court’s decision. In Zebrowski v. Zebrowski, 28 A.D.3d 883, 813 N.Y.S.2d 803 (3rd Dept. 2006), because the trial court’s decision did not provide for the wife to receive accruals in an account between the valuation date and the distribution date, the provision of the QDRO providing for her receipt of such accruals was improper and was stricken on appeal.

The use of a QDRO may be especially helpful where the pension in question is a disability pension. Even in the absence of specific evidence as to what portion of the pension reflects the disability as distinguished from normal retirement, the court, in the QDRO, can simply give the pension administrator the formula to use to do the actual allocation. The administrator may be given a three-step formula: (a) the pensioner’s hypothetical nondisability pension is determined by multiplying the pensioner’s final average salary by the percentage of that salary to which the pensioner would likely have been entitled upon retirement had the disability not cut short his or her employment; (b) the coverture fraction is applied to determine the marital portion of the hypothetical nondisability pension; (c) the actual nondisability portion of the pension is determined by reducing the hypothetical nondisability pension by the percentage of the years of service that the pensioner actually served. Howe v. Howe, 68 A.D.3d 38, 886 N.Y.S.2d 722 (2nd Dept. 2009).

Statute of limitations considerations may preclude efforts to obtain, or modify, a QDRO where the provision for a QDRO was set forth in a separation agreement. In Chayes v. Chayes, 28 A.D.3d 355, 814 N.Y.S.2d 115 (1st Dept. 2006), the parties executed a separation agreement in 1994 which provided that the wife would submit a mutually acceptable document required by the Federal Civil Service Retirement System in order to effectuate a division of the husband’s pension. (This document is called a COAP [Court Order Acceptable for Processing] and serves the same purpose that a QDRO services for a private pension). In December, 1994, promptly after a divorce judgment was entered, the wife sent the federal officials a certified copy of the divorce judgment and a copy of the separation agreement. While the husband was not copied on this submission, he was sent a letter the following month by the federal officials informing him that the federal officials had received the documents from the wife and would proceed to calculate the wife’s share of his pension, telling him as well the method that they would use in order to do. Seven years later, in 2002, the husband commenced an action claiming that the wife had breached the separation agreement by failing to submit a mutually acceptable COAP. He sought to have the court accept his proposed COAP. The Appellate Division, First Department, held that the husband’s claim was time-barred, ruling that the six year contract period of limitations (CPLR 213[2]) applied and began to run no later than when he received the letter from the federal authorities in January 2005. While this case dealt with a party’s effort to re-visit the terms of a QDRO-type document, its logic may be applicable to circumstances where the QDRO-type document is not prepared at all. For example, if the husband had undertaken in the separation agreement to submit the document but failed to do so, an action by the wife for breach of that obligation might be subject to the six-year period of limitations. If the wife had the obligation to submit the QDRO-type document but did not do so, the six year period could present a bar, at least as measured from a demand from the husband that she comply with her obligation.
 
C236B:8: Separate Property--Generally

DRL § 236, Part B, subdivision 1(d) provides a list of certain specific types of property that may not be considered marital property and which must be considered the “separate property” of the titleholding spouse. As will be discussed, there are certain other types of property, in addition to the statutory list, which may not be considered “marital property” and which, perhaps, may not even be considered as “separate property” to the extent that separate property could be considered by the court for its impact on maintenance and other relief.

The courts have developed a presumption that property acquired during marriage, and prior to the execution of a separation agreement or commencement of a matrimonial action, is marital property. A party who claims that property acquired within those timeframes is separate property has the burden of proving such to be the case. Lischynsky v. Lischynsky, 120 A.D.2d 824, 501 N.Y.S.2d 938 (3rd Dept. 1986); Lord v. Lord, 124 A.D.2d 930, 508 N.Y.S.2d 676 (3rd Dept. 1986). Further, if a spouse places his or her separate property into joint names, a presumption of gift arises which, unless rebutted, results in the conclusion that the property is to be treated as marital property. Fessenden v. Fessenden, 307 A.D.2d 444, 761 N.Y.S.2d 725 (3rd Dept. 2003); Zanger v. Zanger, 1 A.D.3d 865, 767 N.Y.S.2d 489 (3rd Dept. 2003); Diaco v. Diaco, 278 A.D.2d 358, 717 N.Y.S.2d 635 (2nd Dept. 2000); Lischynsky v. Lischynsky, supra. But, it is well settled that the spouse who contributed the property may receive credit for the amount of property contributed to the creation of a marital asset. DeMarco v. DeMarco, 143 A.D.2d 328, 532 N.Y.S.2d 293 (2nd Dept. 1988); Coffey v. Coffey, 119 A.D.2d 620, 501 N.Y.S.2d 74 (2nd Dept. 1986). Cases dealing with the commingling of funds received as compensation for personal injuries are separately discussed below.

Usually, where a spouse deposits separate funds into a joint account, the account is treated as a marital asset, but, on distribution, the spouse who contributed the separate property is given a credit for the amount of funds so contributed before the remaining funds are split. SeeSolomon v. Solomon, 307 A.D.2d 558, 763 N.Y.S.2d 141 (3rd Dept. 2003),leave to appeal dismissed, 1 N.Y.3d 546, 775 N.Y.S.2d 242, 807 N.E.2d 292 (2003); Sherman v. Sherman, 304 A.D.2d 744, 758 N.Y.S.2d 667 (2nd Dept. 2003); Zurner v. Zurner, 213 A.D.2d 906, 624 N.Y.S.2d 301 (3rd Dept. 1995). However, the transmutation of separate property into marital property through deposit into a joint account (or into joint names) is only a presumption--a presumption that can be rebutted. If it is rebutted, then the entire amount of the asset will be treated as separate property. For example, in McGarrity v. McGarrity, 211 A.D.2d 669, 622 N.Y.S.2d 521 (2nd Dept. 1995), inherited funds placed in a joint bank account were treated as entirely separate property upon a showing that the husband (whose inheritance it was) simply deposited the money into whatever bank account was most convenient. The McGarrity court also looked to the parties’ circumstances at the time, concluding that, because the parties were living apart at the time when most of the money was received and deposited, it was unlikely that the husband intended to make the wife a gift of his separate property. Likewise, in Lagnena v. Lagnena, 215 A.D.2d 445, 626 N.Y.S.2d 542 (2nd Dept. 1995), the record showed the wife had placed her separate property in joint accounts for convenience purposes only and that she had sole control over those accounts. Yet, in Garner v. Garner, 307 A.D.2d 510, 761 N.Y.S.2d 414 (3rd Dept. 2003), leave to appeal denied, 100 N.Y.2d 516, 769 N.Y.S.2d 203, 801 N.E.2d 424 (2003), where separate property was placed in a joint account, the fact that a single withdrawal was made jointly by the parties was sufficient to defeat the husband’s uncorroborated claim that the account was placed in joint names for convenience purposes.

In Butler v. Butler, 171 A.D.2d 89, 574 N.Y.S.2d 387 (2nd Dept. 1991), the court addressed the issue of the distribution of the appreciation on the value of a marital asset which was acquired with contribution of separate property. In Butler, the parties purchased a house, with the husband contributing 13.8% of the down payment through his separate property and the wife contributing 86.2% of the down payment through her separate property. The value of the house nearly tripled during the marriage. Not surprisingly, the husband argued that, on divorce, each party should get their separate property back dollar-for-dollar, with the balance (the appreciation) being divided between them equally. Equally unsurprisingly, the wife countered that the entire equity in the house should be divided in accordance with the parties’ respective contributions to the acquisition of the house (86.2% to the wife, 13.8% to the husband).

The court found the arguments of both parties to be flawed. The husband’s argument ran afoul of the rule that marital property need not always be equally divided; the wife’s argument was contrary to the principle that appreciation in separate property (if the wife’s 86.2% contribution to the down payment retained that character) can be considered marital where it was due in part to the contributions of the other spouse. 574 N.Y.S.2d at 389.

The court ultimately concluded that there was no bright-line rule to be applied; rather, the result in each case depends upon all of the relevant statutory factors, as well as such other factors as the court finds to be proper to consider. In Butler itself, the court found that the husband’s contributions to the improvement of the home warranted recognition. On all the facts, the court directed that, upon sale of the house, each party should receive a dollar-for dollar credit equal to the amount of their original separate property contribution, and that the balance of the proceeds, after satisfaction of the mortgage, be divided 75% to the wife and 25% to the husband.

Butler is the most comprehensive opinion on the legal issues involved in this area but, on its facts, represents but one approach that courts may take in sorting out the equities involved in particular cases. A counterpoint is Woodson v. Woodson, 178 A.D.2d 642, 578 N.Y.S.2d 217 (2nd Dept. 1991). There, the wife had contributed 31% of the purchase value of certain investment property which was the husband’s separate property. The Appellate Division, without citation to Butler, affirmed an award to the wife of the 31% of the current appraised value of the property.

Equally relevant is the holding in Heine v. Heine, 176 A.D.2d 77, 580 N.Y.S.2d 231 (1st Dept. 1992) where the First Department held it error, at least on the facts presented, to award the husband a percentage of the current value of a townhouse equal to the percentage of the current value of the townhouse paid with his separate property. Following the same path as was traveled in Butler, the court in Heine held that the appreciation was not attributable to the down payment but to extensive renovations paid for by marital funds and supervised by the wife, as well as to mortgage payments made with marital funds, and market factors. Under the circumstances, the Heine court declared that the husband was entitled only to a dollar-for-dollar credit for the separate property contributed, with the balance of the equity in the townhouse to be equally divided between the parties.

Heine, which did not cite Butler, is representative of the approach taken by most courts both before and after the Butler decision. At least where long-term marriages are involved and the property at issue is the marital residence, the Heine approach should generally result in a fair and equitable result. But Butler at least is a reminder that no approach should be automatically followed; the court is obligated to take the particular equities of the individual case into account.

The contributing spouse may not have it both ways; the contributing spouse may not receive both one-half of the asset (unreduced by the amount of the contribution) and a return of the contribution. If the spouse’s fair share of the asset is half of the total value of the asset (including the initial contribution and the return on his or her investment), a separate and additional credit for the separate property invested would be a double recovery. Garvey v. Garvey, 223 A.D.2d 968, 636 N.Y.S.2d 893 (3rd Dept. 1996). Garvey should, however, be read with some care. In that case, the wife contributed separate property towards the start-up of a new business, which developed into a successful enterprise over the years. For some reason, the court described the wife’s contribution to the “seed money” for the business as not being used to acquire identifiable property, to improve existing property or to acquire an existing business. This description seems questionable, since in exchange for the contribution, the wife was presumably acquiring an equitable interest in, or claim to, the business. However, the result seems appropriate, since in exchange for her separate property contribution, the wife received a full one-half interest in the business. The separate property contribution was relatively small when compared to the total value of the business.

The parties may agree to describe certain property as “separate property” in a written antenuptial or separation agreement, entered into pursuant to part B, subdivision 3. Thus, in Schultz v. Schultz, 309 A.D.2d 1020, 765 N.Y.S.2d 676 (3rd Dept. 2003), the court held that property conveyed from both parties into the name of one of them was separate property, where that transfer occurred pursuant to a separation agreement, even though the parties later resumed cohabitation and thereby arguably abrogated the agreement. The court noted that the agreement was valid at the time that the conveyance was made and that the conveyance itself was never repudiated or nullified. See also Parkinson v. Parkinson, 295 A.D.2d 909, 744 N.Y.S.2d 101 (4th Dept. 2002) (agreement signed by husband acknowledging that realty titled in the parties’ joint names was actually the wife’s separate property was evidence in support of the wife’s contention that the property was her separate property, even though agreement did not qualify under the statute for enforcement).

Property acquired before the marriage is separate property, as is property acquired by inheritance or by gift from a party other than the other spouse. The thought is that, if marriage is to be treated as an economic partnership, property which is not the product of that partnership should not be properly regarded as partnership property.

Property acquired before marriage is not a product of the marital partnership and does not constitute marital property. This is true even if the parties had a established romantic relationship. Thus, in Nell v. Nell, 166 A.D.2d 154, 560 N.Y.S.2d 426 (1st Dept. 1990), the court held that a cooperative apartment, acquired by the husband prior to marriage, was his separate property, even though he was romantically involved with the wife at the time and intended the apartment to be the marital abode.

A narrow exception to this principle was staked out in Ryan v. Ryan, 123 A.D.2d 679, 506 N.Y.S.2d 977 (2nd Dept. 1986), where the parties acquired a house shortly before the marriage and renovated it, with both parties contributing towards the purchase price. However, title to the house was held in the husband’s name alone because the wife’s employment kept her from attending the closing. The court held that the entire amount of the property, not just the appreciation in value, should be considered marital property to be divided equally, even though technically the house was acquired by the husband alone prior to the marriage.

Ryan was limited to its facts in Zelnik v. Zelnik, 169 A.D.2d 317, 573 N.Y.S.2d 261 (1st Dept. 1991). There, the court treated a townhouse, acquired by the husband with his separate funds shortly before the marriage, as the husband’s separate property, though it was acquired to serve as the marital residence.

In Burgio v. Burgio, 278 A.D.2d 767, 717 N.Y.S.2d 769 (3rd Dept. 2000), where the husband purchased real property prior to the marriage, financed the down payment and obtained a mortgage in his name, the court held that the property was his separate property. However, where the wedding gifts were used to repay the husband’s separate debt to his siblings, the wife was held entitled to a credit for her share of such funds. Likewise, in Gorelik v. Gorelik, 303 A.D.2d 553, 757 N.Y.S.2d 67 (2nd Dept. 2003), the marital residence, where parties lived during their four-month marriage, was found to be the husband’s separate property, where he bought it before the marriage, title was in his name alone, none of the wife’s funds went towards purchasing the house, the mortgage was in his name alone, and all carrying charges and utilities were paid solely by the husband, with his separate property.

Wedding gifts are held to be marital or joint property, despite the source, unless the gift was something that could be used only by one spouse or was specifically earmarked as exclusively intended for one spouse. Nehorayoff v. Nehorayoff, 108 Misc.2d 311, 437 N.Y.S.2d 584, 588 (Sup.Ct. Nassau County 1981). Thus, it may be that at least certain types of property, acquired before the marriage but in contemplation thereof, may be “marital” and not separate property.

Property given by one spouse to another, prior to and in contemplation of marriage has been treated as separate property.

Lipton v. Lipton, 134 Misc.2d 1076, 514 N.Y.S.2d 158 (Sup.Ct. N.Y. County 1986) holds that an engagement ring, though given subject to the condition that the marriage takes place, is the separate property of the recipient spouse. Accord, Addeo v. Addeo, N.Y.L.J., July 15, 1986, p. 12, col. 6 (Sup.Ct. Kings County). The Lipton court held that the conditional nature of the gift becomes moot when the marriage occurs and, upon marriage, the engagement ring becomes the unconditional property of the recipient. This point is confirmed by Nasca v. Nasca, 302 A.D.2d 906, 754 N.Y.S.2d 502 (4th Dept. 2003) wherein the court held that an engagement ring, given to the wife by the husband prior to marriage, was the wife’s separate property, notwithstanding that the ring had belonged to the husband’s mother. However, the court permitted the husband to retain the ring upon payment to the wife of its adjudicated value.

Property acquired by bequest, devise or descent is separate property. Inheritances are separate property, such as a bequest in a will. However, whether this exception also applies to property held jointly by the decedent and one of the spouses such as realty, Totten Trust bank accounts and other property remains to be clarified. See Hertzler v. Hertzler, 109 Misc.2d 16, 439 N.Y.S.2d 590 (Sup.Ct. Suffolk County 1981). Where the inheritance was to both spouses jointly, the property should be viewed as marital.

Income from separate property is separate property. Sauer v. Sauer, 91 A.D.2d 1166, 459 N.Y.S.2d 131 (4th Dept. 1983). Thus, income or principal from a family trust should probably qualify as property acquired by “bequest” or “devise” or, if the settlor of the trust was not the other spouse, as a “gift”. With respect to “gifts”, it probably will be necessary for the party who claims that the property is “separate” to show that the property was intended for him or her alone. The nature of the gift and the use made of it may be important facts. Gifts exchanged between the spouses during the marriage would be marital property.

Pursuant to Part B, subd. 1(d)(2), compensation received for personal injuries is regarded as separate property. This would include monies received, either in a lump sum or over time, in settlement or as proceeds of a judgment entered by the court. Definition of what constitutes “personal injury” is found in section 37-a of the General Construction Law. SeeEttinger v. Ettinger, 107 Misc.2d 675, 435 N.Y.S.2d 916 (Sup.Ct. Nassau County 1981). Portion of bank account derived from personal injury claim held to be separate property.

A relatively early equitable distribution decision held that, where a party recovers a personal injury award, it is the portion that represents an award for pain and suffering that is separate property; a recovery for economic loss should be marital. Rich v. Rich, 126 Misc.2d 536, 483 N.Y.S.2d 150 (Sup.Ct. Ontario County 1984). That view has been rejected by the Appellate Division, Third Department, as not authorized by the statutory language. Fleitz v. Fleitz, 200 A.D.2d 874, 606 N.Y.S.2d 825 (3rd Dept. 1994). The court held that the fact that the compensation (disability payments) was due to policies paid for with marital funds did not strip the payments of the statutory exemption. The other three Appellate Divisions agree: Gann v. Gann, 233 A.D.2d 188, 649 N.Y.S.2d 154 (1st Dept. 1996); Howe v. Howe, 68 A.D.3d 38, 886 N.Y.S.2d 722 (2nd Dept. 2009); Solomon v. Solomon, 206 A.D.2d 971, 615 N.Y.S.2d 949 (4th Dept. 1994). In Howe, the Second Department ruled that, while the logic of the Equitable Distribution Law suggests the conclusion that the economic portion of a personal injury award should be marital property, the legislative history compels the contrary result. The court, reviewing that history, concluded the statute’s purpose was to exclude from marital property both the economic and the noneconomic portion of a personal injury award.

The placement of the proceeds of a personal injury recovery into a joint account will not transmute the property into marital where the joint account was for convenience only, the funds were managed solely by the injured spouse, and where the non-injured spouse had no involvement with the account, except for a single transaction made at the direction of the injured spouse. Chamberlain v. Chamberlain, 24 A.D.3d 589, 808 N.Y.S.2d 352 (2nd Dept. 2005). See also Herzog v. Herzog, 18 A.D.3d 707, 795 N.Y.S.2d 749 (2nd Dept. 2005), leave to appeal denied, 5 N.Y.3d 711, 806 N.Y.S.2d 161, 840 N.E.2d 130 (2005) (while marital residence was acquired in joint names, the value at time of purchase held to be wife’s separate property where it was shown that she used proceeds from her separate property to purchase the residence; husband denied any interest therein where he did not substantiate that he made any improvements after title was acquired and failed to show any contributions to the residence or to the marriage). However, if the personal injury recovery is placed in a joint account, are commingled with marital funds and used to pay marital debt and acquire marital assets, the recovery will lose its separate property character. Ruzicka v. Ruzicka, 31 A.D.3d 862, 817 N.Y.S.2d 770 (3rd Dept. 2006). Note that in Ruzicka, while both parties were involved in the accident that resulted in the personal injury settlement, the wife was the only party who was seriously injured. Nevertheless, the proceeds were payable to both parties jointly, were not allocated between them, and were augmented because the husband was also in the vehicle at the time of the accident. Thus, it is possible that, even if the funds had not been commingled, the funds could have been viewed as marital property from the outset. See also Crescimanno v. Crescimanno, 33 A.D.3d 649, 822 N.Y.S.2d 310 (2nd Dept. 2006) (where check representing proceeds of husband’s personal injury lawsuit was made out to the parties jointly and deposited into a joint account, apparently opened for purposes of depositing the check, and used to pay marital debts, the funds were transmuted into marital property).

What happens if a spouse sells or transfers separate property during the marriage? The statute provides (Part B, subd. 1(d)(3)), that property acquired in exchange for separate property or any increase in the value of separate property remains separate property, except to the extent that “such appreciation” is due in part to the contributions or efforts of the other spouse.

Property acquired in exchange for separate property remains separate property, at least where it has not been commingled with marital property or an interest in it gifted to the other spouse. See DRL § 236, Part B (subd. 1[d]); seeLischynsky v. Lischynsky, 120 A.D.2d 824, 501 N.Y.S.2d 938 (3rd Dept. 1986) (as to commingling); Wiercinski v. Wiercinski, 116 A.D.2d 789, 497 N.Y.S.2d 179 (3rd Dept. 1986) (as to presumption of gift resulting from Banking Law § 675). As a general rule, in order to establish that particular property is separate property because it was acquired in exchange for separate property, it is necessary to trace the source of the funds used to make the acquisition to separate property. However, even where tracing can be done with specificity, the property may be held separate where there was no other possible source of funds other than separate property. Sarafian v. Sarafian, 140 A.D.2d 801, 528 N.Y.S.2d 192 (3rd Dept. 1988).

But even if the property remains separate property, the appreciation in separated property may be considered marital property under certain circumstances. The appreciation is measured from the time of the marriage, or the time of the acquisition of the property, whichever is later. Where the parties cohabited together prior to marriage, any appreciation in the separate property of one of the cohabitants through the date of marriage belongs entirely to the person whose separate property the item is. Josan v. Josan, 134 A.D.2d 486, 521 N.Y.S.2d 270 (2nd Dept. 1987). Josan establishes that appreciation prior to marriage may not be considered a marital asset. Thompson v. Pittman, 123 A.D.2d 683, 506 N.Y.S.2d 979 (2nd Dept. 1986) and Clerk v. Clerk, 132 A.D.2d 456, 133 A.D.2d 328, 517 N.Y.S.2d 512 (1st Dept. 1987), appeal denied 70 N.Y.2d 611, 523 N.Y.S.2d 495, 518 N.E.2d 6, also make the same point. This line of authority is consistent with the underlying statutory premise--that marriage is an economic partnership. The economic partnership created by marriage cannot exist until marriage has occurred. If non-marital cohabitants wish to form an economic partnership, they may do so; but the partnership can be created only by agreement, not by operation of law. SeeMorone v. Morone, 50 N.Y.2d 481, 429 N.Y.S 2d 592, 413 N.E.2d 1154 (1980).

The standards for measuring when appreciation in separate property may be considered marital have been established by the Court of Appeals in two significant decisions: Price v. Price, 69 N.Y.2d 8, 511 N.Y.S.2d 219, 503 N.E.2d 684 (1986) and Hartog v. Hartog, 85 N.Y.2d 36, 623 N.Y.S.2d 537, 647 N.E.2d 749 (1995).

Price v. Price, supra, focused primarily on whether services as homemaker, spouse, parent and wage earner, are sufficient to permit the court to award the spouse rendering the services an interest in the appreciation of the separate property of the other spouse. In Price, the Court of Appeals held that such spousal contributions are entitled to consideration. The Court held that where the separate property of one spouse has appreciated in value due to the efforts of the titled spouse and where those efforts were aided directly or indirectly by the non-titled spouse, including by homemaker services, the appreciation is the product of the marital partnership and is subject to equitable distribution. Of significance, the Court stated that the question “as to indirect contributions of the nontitled spouse as parent and homemaker is whether there was an appreciation of separate property due to the efforts of the titled spouse during the period when it is shown that those efforts were being aided or facilitated in some way by these indirect contributions. If so, the amount of appreciation during that period is considered a product of the marital partnership over which the trial court ‘retains the flexibility and discretion to structure [a] distributive award equitably’ ”. 511 N.Y.S.2d at 225 (citation omitted) (emphasis in original).

Price, thus, established a three part test. The homemaker spouse seeking to have the appreciation in the other spouse’s separate property treated as marital property must show: (a) that the separate property appreciated in value; (b) that the appreciation was due in part to the efforts of the titled spouse; and (c) the efforts of the titled spouse were aided, directly or indirectly, by the non-titled spouse. These factors require some discussion.

Plainly, there can be no treating appreciation in separate property as marital where there was no appreciation at all. Thus, there is simply no predicate for an award to the non-titled spouse where the separate property of the titled spouse decreased in value. Thompson v. Pittman, 123 A.D.2d 683, 506 N.Y.S.2d 979 (2nd Dept. 1986). The burden is on the non-titled spouse to prove the extent of the appreciation. Capasso v. Capasso, 129 A.D.2d 267, 517 N.Y.S.2d 952 (1st Dept. 1987); seeShahidi v. Shahidi, 129 A.D.2d 627, 514 N.Y.S.2d 259 (2nd Dept. 1987).

The non-titled spouse must also prove that the appreciation resulted, at least in part, from the efforts of the titled spouse. Where, as in Jolis v. Jolis, 111 Misc.2d 965, 446 N.Y.S.2d 138 (Sup.Ct. N.Y. County 1981), affirmed, 98 A.D.2d 692, 470 N.Y.S.2d 584 (1st Dept. 1983), the appreciation resulted entirely from market factors, and not the efforts of the titled spouse, no award is appropriate. While, in Price, the Court of Appeal focused on requiring the non-titled spouse to establish that efforts of the titled spouse caused or contributed to the appreciation, the non-titled spouse should also be eligible for an award upon a showing that the appreciation was due to the efforts of the non-titled spouse, rather than of the titled spouse. SeeCapasso v. Capasso, 129 A.D.2d 267, 517 N.Y.S.2d 952 (1st Dept. 1987).

The non-titled spouse must also prove that he or she made direct or indirect contributions to the efforts of the titled spouse. Whether indirect contributions were made may boil down to a credibility issue. SeeLischynsky v. Lischynsky, 120 A.D.2d 824, 501 N.Y.S.2d 938 (3rd Dept. 1986). The trial court should, in its decision, state the facts concerning the contributions by the non-titled spouse to each property and fix the extent of the appreciations in value. SeeBronstein v. Bronstein, 122 A.D.2d 553, 504 N.Y.S.2d 894 (4th Dept. 1986). Indeed, as a matter of law, spousal and homemaker services entitle a spouse to some measure of the appreciation in the value of the other spouse’s separate propertied business. SeeCapasso v. Capasso, 119 A.D.2d 268, 506 N.Y.S.2d 686 (1st Dept. 1986).

In order to appreciate the significance of the Court of Appeals’ decision in Hartog v. Hartog, supra, it is important to reflect again on the holding of Price as well as on the lower court cases following Price. The key issue in Price was whether indirect contributions of the non-titled spouse, as homemaker or parent, may be considered as meeting the criteria for treating the appreciation as marital property. The Court held that they are. In resolving that issue, the Price Court adopted the use of an active/passive test for determining whether the appreciation was caused or aided by the efforts of the titled spouse. Because Price was focused on the nature of the efforts of the nontitled spouse, the active-passive test was not central to the Court’s analysis. However, the cases following Price held that under the active/passive test, the non-titled spouse had to establish the extent to which appreciation was caused by the efforts of the parties, as distinguished from appreciation caused by third parties, market factors, or other circumstances beyond the parties’ control. SeeJosan v. Josan, 134 A.D.2d 486, 521 N.Y.S.2d 270 (2nd Dept. 1987); Pressman v. Pressman, N.Y.L.J., September 29, 1989, p. 6, col. 2 (Sup.Ct. N.Y. County); see cases cited in dissenting opinion in Robinson v. Robinson, 166 A.D.2d 428, 560 N.Y.S.2d 665 (2nd Dept. 1990), appeal dismissed, 76 N.Y.2d 1017, 565 N.Y.S.2d 767, 566 N.E.2d 1172. This standard placed a great burden on the non-titled spouse. While the non-titled spouse could readily establish that the separate property increased in value, using expert testimony to do so, it is far more difficult to establish the causes for any such appreciation. While experts may be able to provide opinion testimony as to the value of property, often an attempt to explain why values have changed over time may be nothing more than speculation. For example, where a spouse has worked in the business, it may be difficult to establish what appreciation resulted from his or her efforts, what resulted from the efforts of others, and what resulted from market factors. Likewise, where the parties have improved and renovated a house, it may be difficult to pinpoint what portion of the appreciation is attributable to renovations and what portion is due to market factors.

Recognizing this difficulty, the courts began to move toward liberalizing the causality aspect of the Price test. For example, in Zelnik v. Zelnik, 169 A.D.2d 317, 573 N.Y.S.2d 261 (1st Dept. 1991), it was held that the non-titled spouse does not have to provide a mathematical calculation as to how much appreciation was attributable to each particular possible causal factor. All that the non-titled spouse had to do was to exclude market factors as being the sole causative factor. But, under these liberalizing approaches, once the appreciation was held to be not due to market factors alone, the entire amount of the appreciation was viewed as marital property. While the non-titled spouse was not always awarded an equal share of the appreciation, the courts viewed the appreciation as being all marital. See alsoDerderian v. Derderian, 167 A.D.2d 158, 561 N.Y.S.2d 239 (1st Dept. 1990), appeal denied, 77 N.Y.2d 804, 568 N.Y.S.2d 912, 571 N.E.2d 82; Robinson v. Robinson, 166 A.D.2d 428, 560 N.Y.S.2d 665 (2nd Dept. 1990), appeal dismissed, 76 N.Y.2d 1017, 565 N.Y.S.2d 767, 566 N.E.2d 1172.

Hartog, while a liberalizing decision, rejects the use of the all or nothing approach to the characterization of appreciation in separate property. Hartog holds that, while the non-titled spouse need not prove a direct causal link between the activities of the spouses and the increase in separate property, appreciation is marital property only in the same proportion that the active efforts of the spouses bear to the active efforts of others and any additional active or passive factors.

In Hartog, the husband was primarily involved in the family jewelry business. During the marriage, the husband worked long hours at the jewelry concern. However, the husband was also a shareholder and director of two other family businesses. The husband’s brother or others had primary responsibility for the day to day management of these other two concerns. The husband was listed as a part-time employee, had check writing authority, attended regular corporate meetings, and participated in the corporate profit-sharing plans. There was no dispute that the husband’s separate-propertied interest in the jewelry concern had appreciated in value during marriage and that, because of the wife’s contributions to the husband’s direct efforts in that business, the appreciation would be treated as being entirely marital property. What was disputed was the appreciation in the value of the other two businesses.

The husband argued that he was heavily involved in the jewelry business and that his efforts in relation to the other two companies were minimal, and that the wife had not shown that his efforts had any bearing on the appreciation. The wife maintained that the husband’s efforts, however minimal, were active, that the existence of active efforts rendered the entire appreciation marital, and that the appreciation should be divided equally, as the other marital assets were divided equally. In essence, the parties argued, from their own perspectives, that there was an all or nothing standard: either all the appreciation was marital or none of it was marital.

Hartog acknowledged that where the titled spouse’s involvement with separate property is both limited and active, and the property itself is active in nature, it may be difficult, if not impossible, to link such limited specific efforts to quantifiable, tangible results. But to rule that all of the appreciation in active property should be retained by the titled spouse, ruled the Court, would allow the titled spouse a windfall by nullifying the contributions of the non-titled spouse, at least insofar as that property is concerned. The non-titled spouse is entitled to share in the fruits of his or her labor, even if the connection between the activity and the appreciation cannot be established with precision.

Not specifically stated by the Court is the converse proposition. To allow all of the appreciation to be treated as marital, where efforts of the titled spouse were minimal, would be to ignore the statutory distinctions between separate and marital property and, in effect, treat all appreciation in any active asset as being entirely marital in nature.

Rather than accept either polar position, the Court held that where an asset, like an ongoing business, is, by its very nature, nonpassive and the titled spouse engaged in active efforts towards that asset, even to a small degree, then the appreciation in that asset is, to a proportionate degree, marital property. It is important to note that Hartog does not make all the appreciation marital under these circumstances: “By considering the extent and significance of the titled spouse’s efforts in relation to the active efforts of others and any additional passive or active factors, the fact finder must then determine what percentage of the total appreciation constitutes marital property subject to equitable distribution.” 85 N.Y.2d at 48-49, 623 N.Y.S.2d at 544.

In Hartog itself, the Court of Appeals sustained the finding of the trial court that 25% of the husband’s share of the appreciation in the value of the two companies should be considered marital. Thus, 25% of the appreciation was ruled marital and 75% was considered separate. The 25% figure was based on the husband’s activities, consisting of his attendance at corporate meetings, holding officers’ positions, being listed as an employee, signing checks, discussing corporate business, and participating in the profit-sharing plans.

Whether the husband’s active efforts fairly represents 25% of the total of all active and passive factors may be questioned. But the real issue is whether assignment of a 25% share of the appreciation to marital property is fair and reasonable, under the circumstances of a long marriage, an active business, and a relatively lengthy list of actions by the husband (though none of the actions was particularly extensive). Indeed, given that the husband was an active participant in key business decisions, it was fair to assume that the husband’s active efforts had at least some impact in contributing to the appreciation.

In Hartog, the Court may have been influenced by the fact that the husband drew a salary and participated in the profit-sharing plan. A lesser percentage, or no award at all, may be indicated where the non-titled spouse neither derived any economic benefits (except stock ownership or dividend payments) nor attended meetings.

Hartog may not be applicable to cases in which the titled spouse had a regular active role in an active asset or to cases in which the titled spouse had only a limited role in an essentially passive asset. As to the former, Hartog should not be read as affecting those cases in which spouses have been awarded half of the appreciation in separate propertied businesses. Indeed, in Hartog, the wife received an award of 50% of the appreciation in the jewelry concern which was the husband’s primary responsibility. On the other hand, because Hartog involved nonpassive business entities, it should not be extended to situations in which more passive properties are involved. A good counterpoint case is Feldman v. Feldman, 194 A.D.2d 207, 605 N.Y.S.2d 777 (2nd Dept. 1993) where the nontitled spouse did not receive any award for the appreciation in the value of commercial real estate, where the titled spouse’s only activities consisted of periodic visits to collect rent and ensure that the premises were being maintained by the tenant. The commercial real estate involved inFeldman would be more properly viewed as an essentially passive investment and the titled spouse’s activities were even more minimal than those involved in Hartog.

In Ellis v. Ellis, 235 A.D.2d 1002, 653 N.Y.S.2d 180 (3rd Dept. 1997), where the husband had five siblings who also worked in the family business and the husband testified that, over a period of years, he had been responsible for 20% of the total sales of the business, the court held that 20% of the appreciation of the value of the business would be held to be due to the active efforts of the husband and, to that extent, marital property. See alsoIvani v. Ivani, 303 A.D.2d 639, 757 N.Y.S.2d 89 (2nd Dept. 2003) (husband’s “hands-on” active participation in management of corporation, which husband owned 20% interest and balance was owned by his parents and sister, supported determination to include preseparation appreciation in the husband’s 20% share).

In Acosta v. Acosta, 301 A.D.2d 467, 753 N.Y.S.2d 506 (1st Dept. 2003), leave to appeal denied, 100 N.Y.2d 504, 762 N.Y.S.2d 874, 793 N.E.2d 411 (2003), where the wife was awarded half of the appreciation in the husband’s separate property, her contributions, over a six-year marriage, were both direct and indirect (wife directly contributed through her work as unpaid superintendent and janitor of a building and indirectly by homemaking and child caring). On the other hand, in Sutka v. Sutka, 299 A.D.2d 540, 751 N.Y.S.2d 499 (2nd Dept. 2002), leave to appeal denied, 99 N.Y.2d 510, 760 N.Y.S.2d 101, 790 N.E.2d 275 (2003), the husband was denied any award for an interest in the wife’s consulting business, where he made no financial contribution to it and any indirect contributions he made were de minimis.

Of course, it still remains necessary to establish that there was appreciation in the property. See, e.g., Carniol v. Carniol, 306 A.D.2d 366, 762 N.Y.S.2d 619 (2nd Dept. 2003) (wife failed to prove that $250,000 increase in value of husband’s separate propertied residence, used by the parties as the marital residence, was attributable to the efforts of either party or that there was a causal connection between her contributions to the marital relationship and the appreciation of the marital home). Thus, in Mutt v. Mutt, 242 A.D.2d 612, 662 N.Y.S.2d 133 (2nd Dept. 1997), the husband was denied an award on account of the residence which was the wife’s separate property where he failed to show that the property appreciated and failed to show how his efforts contributed to any alleged increase. See Pulice v. Pulice, 242 A.D.2d 527, 661 N.Y.S.2d 675 (2nd Dept. 1997) (no award to wife for interest in separate property gifted to husband since wife offered no evidence of value of property at the time of the gift to the husband); seeBurgio v. Burgio, 278 A.D.2d 767, 717 N.Y.S.2d 769 (3rd Dept. 2000) (where wife did not offer expert testimony as to value of husband’s premarriage real property, there was no evidence of appreciation and, as wife had burden of proof, no award to her could be made). However, notwithstanding the lack of appreciation, there may be a recovery of marital funds expended on separate property which either held its value or lost value. Thus, in one case, where the money expended on the marital residence owned by husband exceeded its value, there was no appreciation; however, the wife was held entitled to recoup her share of marital funds used to reduce the indebtedness on house and to pay for improvements. This result was achieved by allowing the husband to recoup his separate property contribution from sale proceeds with the wife to share in any proceeds above the separate property contribution. Carr v. Carr, 291 A.D.2d 672, 738 N.Y.S.2d 415 (3rd Dept. 2002).

For additional discussion on these points, see Scheinkman, New York Law of Domestic Relations, Chapter 14 (West 2nd Ed. 2009).
 
C236B:9: Distributive Awards

This is a term introduced by the Equitable Distribution Law. DRL § 236, Part B, subdivision (1)(b) defines a distributive award as a payment or payments made in lieu of or to “supplement, facilitate or effectuate” a property distribution. A distributive award may be payable in one lump sum or in a series of fixed amounts, spread over time. A distributive award may be ordered, for example, where it may not be feasible or appropriate to actually divide the underlying property. See Part B, subd. 5(e). A prime example is a spouse’s business interest. Instead of distributing a share of the spouse’s interest directly to the other spouse, and thus adding a “partner” whose presence may be of concern to the owner-spouse and third parties, the court could make a distributive award which would provide for payment to the non-owner spouse of his or her equitable share of the spouse’s business interest. The use of a distributive award may be particularly valuable in cases where the owner spouse has an interest in a professional partnership or corporation, such as a law firm or medical practice. There may be legal or ethical considerations which bar the transfer of a direct interest to the other spouse; use of a distributive award would avoid such constraints.

The purpose of the second sentence to the distributive award definition (Part B, subd. 1[b]) is to try to ensure that amounts received as a distributive award would not be treated as “alimony” or “maintenance” for income tax purposes. The statute is designed to avoid having distributive awards considered as taxable income to the recipient spouse and as a deductible item to the payor spouse. The court is advised by the statute not to include “income” within a distributive award and the taxing authorities are notified of this proviso. However, the Internal Revenue Service is not bound by this provision and is free to examine whether an award in a given case constitutes income rather than a property settlement or distribution.

As with maintenance, a distributive award can be directed by the court or can be provided for in a “valid” agreement between the parties.
 
C236B:10: Post-Divorce Maintenance Redefined

Essentially, post-divorce maintenance consists of periodic payments made by one spouse (or former spouse) for, or toward, the support of the other. Maintenance is spousal support; under Part A and its predecessor, payments for support of a spouse are called “alimony”. Despite the reforms of recent years, the term alimony may carry with it sexist perceptions and connotations, at least in the general public. Because substantial changes have been made in the law governing spousal support, whatever it is called, it is for the best that the label has been changed in order to red-flag the change in some basic concepts. Moreover, the term “maintenance” is functional and descriptive, without being loaded down with implied values built up over generations.

The definition of maintenance in itself has brought major changes, and some new concepts. Each word and sentence of the definition must be studied.

The statutory definition was drafted with an eye toward the Internal Revenue Code which provides that alimony (spousal support) payments are deductible by the payor spouse and are taxable to the recipient spouse, provided that certain conditions are met.

As was the case with alimony, maintenance can be provided for in an agreement between the parties or be awarded by the court. Under the Internal Revenue Code, periodic payments made to a spouse pursuant to either a separation agreement or certain court orders qualify for deductibility by the payor and taxability to the recipient. The Legislature has stipulated that maintenance can be provided for in a “valid” agreement between the parties. If an agreement is invalidated, it may be that payments made thereunder may lose their prior character as “maintenance”.

Maintenance is payable “at fixed intervals”. Under Part A, alimony awards were and are typically fixed on a per week, or sometimes, on a per month basis. Now the parties, or the court, may select whatever fixed interval best meets the circumstances of the case and the parties. There may be situations where longer intervals between payments are appropriate.

Maintenance may be provided for a “definite” or “indefinite” period of time. Under prior law (Part A), “permanent alimony” went on forever until one of certain contingencies occurred or until the award was modified by the court. Efforts to limit alimony payments in advance to a one-time lump sum or to periodic payments limited to a period of months or years were generally unsuccessful (both where alimony was provided by agreement and where imposed by the court) on account of former General Obligations Law section 5-311, unless the supported spouse was the guilty party in a fault divorce. Under Part B, the period in which maintenance is to be paid may be limited to a definite period.

In 1986, the Legislature extensively reworked the provisions of the Equitable Distribution Law concerning maintenance awards. The Legislature expressed the view that the maintenance provisions of the Equitable Distribution Law had been “incorrectly interpreted” by the courts so as to “deny indefinite (permanent) maintenance to divorced women who come away from long term marriages” or from “short term marriages where there are young children to be cared for.” Such interpretations, it was said, contribute to the “feminization of poverty”. Assembly Memorandum In Support of Assembly Bill 10567-A. On the basis of these legislative findings, the very definition of maintenance was recast so as to eliminate the prior statutory language that set the purpose of maintenance as granted to meet the reasonable needs of one of the parties. Rather, maintenance is now described as payments provided for by a valid agreement of the parties or as awarded by the court, pursuant to subdivision 6 of the statute, to be paid at fixed intervals over a determinate or indeterminate period of time.

The concept of alimony was originally developed as a means for providing support to women, after the termination of marriage, as a counter-balance to common law principles which left control of family property to men in an era in which opportunities for women in the business world were, at best, extremely limited. In 1980, when the Equitable Distribution Law was enacted, there were some who anticipated that post-divorce spousal support, redefined as maintenance, would fade away as a common remedy. The theory was that, with property being equitably distributed and with greater opportunity for women in the workplace, the need for spousal support would sharply decrease.

The Equitable Distribution Law, as originally enacted, accepted this theory, at least in part, by encouraging judges to provide the needy spouse with an opportunity for employment training and limiting spousal support payments to the period in which training was to occur. Taking the Legislature at its word, many of the early maintenance cases under Equitable Distribution reflected a pronounced tendency to deny long-term maintenance. However, as noted above, the Legislature found that the limitation of maintenance was too restrictive in cases involving long-term marriages or marriages with young children. The Legislature recast the statutory provisions concerning maintenance in order to correct this situation.

Since the legislative adjustment, the courts have recognized that, notwithstanding the advent of equitable distribution of marital property and advances made by women in the business world, meaningful, long-term maintenance remains an essential remedy in appropriate cases. Due to limited family assets, property distribution may not be sufficient to carry a needy spouse along. There are also instances where the assets distributed may not--or should not--be sold. For example, even where the more dependent spouse is awarded title to the family residence, the presence of children and additional expense involved in obtaining an alternative residence may dictate that the residence not be sold. Likewise, it may be unrealistic to expect that a spouse who has been a homemaker for decades can readily, within a period of a few years, enter or re-enter the business world and achieve anything close to the same level of financial success experienced by the more affluent spouse who has had the benefit of participating in the work force all those years. Moreover, the presence of young children and their needs may hinder--or entirely prevent--the efforts of the custodial parent to earn a livelihood.

There is no requirement that a durational limitation be imposed on a maintenance award. Kerlinger v. Kerlinger, 121 A.D.2d 691, 504 N.Y.S.2d 454 (2nd Dept. 1986); Foy v. Foy, 121 A.D.2d 501, 503 N.Y.S.2d 823 (2nd Dept. 1986). A durational limitation should not be imposed where the needy spouse is not likely to be completely self-supporting. Malamut v. Malamut, 133 A.D.2d 101, 518 N.Y.S.2d 639 (2nd Dept. 1987); Kerlinger v. Kerlinger, supra. The court should consider the age, level of education, and previous employment history of the needy spouse. Jones v. Jones, 133 A.D.2d 217, 519 N.Y.S.2d 22 (2nd Dept. 1987). The court should take into account the difficulties that a homemaker of advanced years and limited skills would have in obtaining employment. Di Bella v. Di Bella, 140 A.D.2d 292, 527 N.Y.S.2d 541 (2nd Dept. 1988); seeIacobucci v. Iacobucci, 140 A.D.2d 412, 528 N.Y.S.2d 114 (2nd Dept. 1988).

In Hartog v. Hartog, 85 N.Y.2d 36, 623 N.Y.S.2d 537, 647 N.E.2d 749 (1995), the Court of Appeals, detecting a reluctance by the lower courts to order permanent maintenance, revitalized the legislative directive that the courts consider the parties’ standard of living during the marriage. In Hartog, the Court of Appeals reminded the lower courts that consideration of the predivorce standard of living is an essential component of evaluating and properly determining the duration and amount of the maintenance award. The Court observed that, with the 1986 amendments, the Legislature intended that the predivorce standard of living be a mandatory factor for the court’s consideration in determining the amount and the duration of maintenance awards.

In Hartog, the issue at hand was the length of the award, not the amount. The trial court had ordered lifetime support, which was reduced to a five-year period by the Appellate Division, based on the wife’s ability to become self-supporting. The Court of Appeals noted that, even if the wife had the ability to become self-supporting with respect to some standard of living in no way obviated the need for the court to consider the predivorce standard of living and did not create aper se bar to lifetime maintenance. On the other hand, the Court stated that a predivorce “high life” standard of living was not a guarantee that the less affluent spouse would be entitled to an award of lifetime maintenance. Rather, the matrimonial courts are to consider the payee spouse’s reasonable needs and the predivorce standard of living in the context of the other enumerated statutory factors, and then, in their discretion, fashion a fair and equitable maintenance award accordingly.

Thus, Hartog does not require that lifetime maintenance be awarded. It is, however, required that the courts consider the recipient spouse’s reasonable needs and the predivorce standard of living in the context of the enumerated factors. Merely because the dependent spouse has the ability to be self-supporting by some standard of living, the award of lifetime maintenance may still be appropriate.

In Bean v. Bean, 53 A.D.3d 718, 860 N.Y.S.2d 683 (3rd Dept. 2008), the Appellate Division, Third Department, held that it was appropriate for the wife to receive $20,000 per month pending her receipt of her share of the marital assets and, thereafter, $15,000 per month during her lifetime. While the amount of martial assets to be received by the wife was not set forth in the appellate decision, it appears that it was substantial. The husband had engaged in various forms of economic fault and had his income to be imputed at $1,000,000 per year. The husband had terminated the wife’s employment with his company and showed an intent to strangle her financially. While the wife was capable of supporting herself at some level, there was no showing of the extent of her current earning ability, let alone that it would approach the multimillion dollar level that was enjoyed during the marriage. The parties had an extremely affluent lifestyle, had been married for some 13 years, and had a child.

In Holterman v. Holterman, 307 A.D.2d 442, 762 N.Y.S.2d 152 (3rd Dept. 2003), affirmed, 3 N.Y.3d 1, 781 N.Y.S.2d 458, 814 N.E.2d 765 (2004), nondurational maintenance was granted to the wife in view of the 19 years of marriage during which the wife sacrificed her career and in view of the fact that the wife was found unable to achieve reasonable parity to the marital standard of living with her own employment. In addition, while the wife’s medical condition did not preclude her obtaining employment, it did impact on when she could obtain employment and the amount she could earn. However, in Garner v. Garner, 307 A.D.2d 510, 761 N.Y.S.2d 414 (3rd Dept. 2003), leave to appeal denied, 100 N.Y.2d 516, 769 N.Y.S.2d 203, 801 N.E.2d 424 (2003), the court held that it was not appropriate to consider the marital standard of living as a factor in maintenance where the parties had not lived together for five years as of the time the action was commenced and had not lived together for eight years as of the time of trial. The court did not discuss or cite the statute. Perhaps the decision can be better viewed as implicitly acknowledging that there was no relevant marital standard of living to be considered as the parties had not resided together for so long.

If a durational limitation is imposed, it should be of a reasonable length to permit the needy spouse to become self-supporting. Taylor v. Taylor, 122 A.D.2d 134, 504 N.Y.S.2d 698 (2nd Dept. 1986).

The amount of maintenance, and the duration thereof, is a matter committed to the sound discretion of the court. Petrie v. Petrie, 124 A.D.2d 449, 507 N.Y.S.2d 550 (3rd Dept. 1986), reargument denied, appeal denied 511 N.Y.S.2d 558, appeal dismissed 69 N.Y.2d 1038, 511 N.E.2d 89. However, the court may not simply direct continuance of a pendente lite award. Sass v. Sass, 129 A.D.2d 622, 514 N.Y.S.2d 257 (2nd Dept. 1987).

An interesting question is whether a durational limitation can be imposed on a maintenance award made in an action in which no matrimonial relief is granted. The maintenance provisions of the Equitable Distribution Law apply even where no matrimonial relief is granted in the case. SeeForbush v. Forbush, 115 A.D.2d 335, 496 N.Y.S.2d 311 (4th Dept. 1985). This would, seemingly, include the authority conveyed by DRL § 236, Part B, subdivision 1(a) to impose a durational limit on maintenance. However, the provisions of the Equitable Distribution Law must be reconciled with those of Article 4 of the Family Court Act, the Article which governs the rights of support between married persons. Under Article 4, each spouse owes a duty of support to the other, during marriage and there is nothing which authorizes the court to impose a durational limitation on a support order.

It would seem advisable, as a general rule, not to impose a durational limitation unless the marriage is dissolved. A durational limitation on maintenance is appropriate in the context of planning for all aspects of the parties’ separate, post-marriage economic existence. The durational limitation is but part of an economic package which includes property distribution. Where the marital tie is not severed, mutual support obligations persist, marital property is not equitably distributed, and the same level of permanency does not attach to the result. Moreover, to impose a durational limitation where the wealthier spouse was the unsuccessful plaintiff in the matrimonial action would allow that spouse to gain some profit by losing. The losing plaintiff would gain a durational limitation that he or she could have obtained if the needy spouse, after successfully resisting the matrimonial action, sought support under Article 4 of the Family Court Act.

In Blisko v. Blisko, 149 A.D.2d 127, 544 N.Y.S.2d 670 (2nd Dept. 1989), the court ruled that a fixed durational limitation may not be imposed in cases where marital status relief is denied. To impose a durational limitation, the court reasoned, where the parties are still married would be contrary to the public policy that spouses are liable for each other’s support and would inappropriately treat the marriage as financially ended, though legally it is not.

Consistent with prior law, an award of maintenance is to terminate upon the death of either party or upon the re-marriage, whether valid or invalid, of the recipient. A maintenance award is also to terminate upon modification of the final judgment made pursuant to DRL § 248.

When the court awards maintenance, the law determines the circumstances under which payments terminate. Unless the court provides for a determinate period of maintenance, payments are due until either party dies, the supported spouse remarries, or the court modifies the award. These legal principles are stated in the very definition of maintenance given in Section 236, Part B, subdivision 1(a). Remarriage of the supported spouse includes both a ceremonial marriage and a common law marriage, if valid in the place where contracted. If a remarriage occurs, a subsequent dissolution of the second marriage will not revive the maintenance obligation of the prior spouse. Another terminating event that is the equivalent of a remarriage is the wife’s cohabitation with another man, provided that she holds herself out as his wife. See DRL § 248.

The ground rules are different where the maintenance payments are fixed by agreement. Where the parties contract with respect to maintenance, the termination events are those that the parties list in their agreement. Where the parties list several terminating events, their list is generally construed by the courts as being exclusive, even if the omitted events would otherwise be available by operation of law. The parties are free to expand the list of terminating events; they are also free to contract the list.

These principles were applied in Slagsvol v. Schneck, 213 A.D.2d 537, 624 N.Y.S.2d 182 (2nd Dept. 1995), appeal dismissed 85 N.Y.2d 968, 629 N.Y.S.2d 726, 653 N.E.2d 622. There, the parties’ agreement allowed the husband to reduce his payments when the wife obtained employment. The agreement did not specifically authorize the husband to stop paying when the wife remarried, which she did. While, under these circumstances, the omission of remarriage as a terminating event might alone not be enough to support the conclusion that, as a matter of law, the husband was still liable, what did the husband in was that his attorney warned him, before he signed the agreement, that remarriage should be specifically included. The husband declined to follow that advice, saying it was not necessary and that he trusted the wife.

What is significant also in Slagsvol is that the husband retained counsel to draft the agreement based upon terms negotiated directly between the parties. There is no indication in the case that the wife had her own counsel. While not stated explicitly in the Appellate Division decision, the court may have had in mind the general principle that contracts are construed against the drafter.

Slagsvol was a 3-1 decision, in which the dissenting justice pointed out that there was no apparent quid pro quo for the husband’s relinquishment of the customary right to stop paying upon remarriage. That being the case, and because of the husband’s sworn claim that the parties themselves did not believe that they needed to explicitly include remarriage as a terminating event, the dissenting judge urged that a hearing should be held to resolve what was perceived to be an ambiguity in the contract.

There are situations where the parties may bargain to have maintenance payments continue despite remarriage. For example, in Quaranta v. Quaranta, 212 A.D.2d 683, 622 N.Y.S.2d 778 (2nd Dept. 1995), the wife relinquished all claims to her husband’s pension in exchange for lifetime maintenance payments. The only terminating events listed in the agreement were the deaths of the parties, while it was also stipulated that, if the husband’s pension payments increased, the wife’s maintenance would also be increased. When the wife remarried, the husband sought to be relieved of the maintenance payments, noting that the agreement did not explicitly require him to continue them. The courts denied his application, without hearing, holding that the tenor of the agreement reflected an intent of both parties to continue the maintenance payments regardless of the marital status of the wife.

These cases suggest that, whether the parties intend to continue or discontinue payments upon remarriage of the supported spouse, it is much more effective to specifically state that intent in the agreement. Much second-guessing as to what the intent was and much litigation expense can be avoided by listing the terminating events in the agreement. And, if particular events are not put on the list, the payor spouse may properly be held to have waived or abandoned any attempt to use non-listed events as a basis for terminating. Whether the parties trust each other or not (and few divorcing couples do), they make a written agreement for the purpose of setting forth the terms of their deal. If the payor spouse does not obtain the inclusion of a particular event on the list of terminating events, he or she must ordinarily live with the consequences.

DRL § 248 provides for modification where the “wife” has remarried or where she lives habitually with another man and holds herself out as his wife. In view of the language providing that an award of maintenance “shall terminate upon” death of either and on the remarriage of the recipient, it may be that termination on those grounds is to be automatic. Under DRL § 248, termination for either a remarriage or a “holding out” as married is not self-executing--a court order is necessary. That the Part B definition specifically provides for termination upon re-marriage of the recipient, in addition to the reference to DRL § 248, lends some support to a construction of the statute as making such termination automatic. Termination of maintenance in a holding out as married situation still can be done only by court order.

DRL § 248 was not amended with the Equitable Distribution Law reforms. On its face, the statute contains gender-based discriminations but some case law exists construing it to be gender-neutral. See Commentary to DRL § 248.

Additional considerations pertaining to maintenance are discussed in Practice Commentaries C236B:35 through C236B:41, infra and also see Scheinkman, New York Law of Domestic Relations (West 2nd Ed. 2009), Chapter 15.
 
C236B:11: Opting Out Agreements--Generally

A separation agreement is a contract between a husband and wife in which the parties, who have decided to live apart, agree on the manner in which the obligations of the marital relationship are to be carried out. In addition, the execution of a separation agreement may be a prelude to the termination of the marriage itself. A divorce action may be maintained where the parties have lived separate and apart for a period of at least one year pursuant to a written separation agreement and where the party who seeks the divorce has substantially performed all of the terms and conditions of the agreement. See Domestic Relations Law § 170, subd. 6. While some separations may terminate by reconciliation and other separation agreements may lapse by their own terms after a period of months or years, and still others may continue in effect indefinitely without a termination of the marital status, most separation agreements are followed by divorce. Hence, separation agreements should appropriately be drawn with the possibility of divorce in mind, especially since the very execution of the agreement may set the stage for the formal termination of the marriage.

Public policy favors agreements between the parties. SeeGalusha v. Galusha, 116 N.Y. 635, 22 N.E. 1114 (1889). Separation agreements, where a marriage no longer exists in fact, are encouraged in order to allow parties to resolve their disputes by themselves, without the need for painful and expensive litigation which may be harmful to themselves and to their children. E.g., Butler v. Marcus, 264 N.Y. 519, 191 N.E. 544 (1934); In re Rhinelander’s Estate, 290 N.Y. 31, 47 N.E.2d 681 (1943); Gedraitis v. Gedraitis, 109 Misc.2d 420, 439 N.Y.S.2d 978 (Sup.Ct. Erie County 1981). The establishment of a ground for divorce predicated upon living separate and apart pursuant to a written separation agreement was based upon a legislative recognition that it was morally and socially desirable to society as a whole and the parties in particular to allow the parties to extricate themselves from a perpetual state of marital limbo. Christian v. Christian, 42 N.Y.2d 63, 396 N.Y.S.2d 817, 365 N.E.2d 849 (1977); Gleason v. Gleason, 26 N.Y.2d 28, 308 N.Y.S.2d 347, 256 N.E.2d 513 (1970).

The parties to a separation agreement are not entirely free to contract as they choose; their agreement must conform to the laws governing the marital status on pain of invalidity of the contract. SeeIn re Tierney’s Estate, 148 Misc. 378, 266 N.Y.S. 51 (Surr.Ct. Bronx County 1933). Even though there may not be grounds for a judicial separation or divorce, the parties may agree to separate under terms that are permissible by law. SeeChamberlin v. Chamberlin, 193 App.Div. 784, 184 N.Y.S. 464 (1st Dept. 1920).

General Obligations Law § 5-311 prohibits husbands and wives from contracting to alter or dissolve a marriage. However, the statutory prohibition is not violated unless an agreement contains an express provision requiring the dissolution of the marriage. Usually, careful drafting of an agreement avoids any possibility of a violation of the statute. However, in Taft v. Taft, 156 A.D.2d 444, 548 N.Y.S.2d 726 (2nd Dept. 1989), the court found a violation in a provision in a separation which provided that the parties “shall proceed” to obtain a divorce on specified grounds, with the husband to pay certain court costs. While the court concluded that this provision appeared to violate the statute, it was able to save the balance of the agreement because of another provision in the agreement--a severability clause. Under that clause, the offending provision could be severed and the balance of the agreement enforced. In Akgul v. Akgul, 175 A.D.2d 194, 572 N.Y.S.2d 338 (2nd Dept. 1991), the court, distinguishing Taft, held that there is no statutory violation unless the challenged agreement expressly requires a party to seek dissolution of the marriage. In Akgul, the agreement provided for certain rights and contingencies if the wife resumed prosecution of a previously commenced divorce action and obtained a divorce. The primary purpose of the agreement was to accomplish a reconciliation while the divorce litigation was placed in abeyance. Since the agreement did not require the wife to resume prosecution of her action and obtain a divorce, but merely provided for what would happen in the event she did, there was no statutory violation. This type of contingency planning has long been recognized as valid and not violative of General Obligations Law § 5-311.

An antenuptial agreement on the other hand, is a contract between a man and a woman made in contemplation of marriage which provides, among other things, for the property, support, inheritance, and custodial rights of the parties in the event of subsequent disputes between them. See, e.g., In re Carnevale’s Will, 248 A.D. 62, 289 N.Y.S. 185 (3rd Dept. 1936). Antenuptial agreements are not contrary to public policy and have long been favored by the law. Shonfeld v. Shonfeld, 260 N.Y. 477, 184 N.E. 60 (1933); Johnston v. Spicer, 107 N.Y. 185, 13 N.E. 753 (1887). A duly executed antenuptial agreement, by which the parties agree in advance of the marriage to the resolution of disputes that may arise after its termination, is valid and enforceable. Avitzur v. Avitzur, 58 N.Y.2d 108, 459 N.Y.S.2d 572, 446 N.E.2d 136 (1983), cert. denied 104 S.Ct. 76, 464 U.S. 817, 78 L.Ed.2d 88 (1983); Matter of Davis, 20 N.Y.2d 70, 281 N.Y.S.2d 767, 228 N.E.2d 768 (1967). Section 3-303 of the General Obligations Law provides that a contract made between persons in contemplation of marriage, i.e., an antenuptial agreement, remains in full force after the marriage takes place.

As to the statute of limitations pertaining to antenuptial agreements, see Section 250 of the Domestic Relations Law and the Practice Commentary thereto.

A major decision dealing with the ability of an antenuptial agreement to waive death benefits in an employee benefit plan was rendered in Hurwitz v. Sher, 982 F.2d 778 (1992), cert. denied, 113 S.Ct. 2345, 508 U.S. 912, 124 L.Ed.2d 255. Hurwitz holds that federal law, not state law, controls the legal viability of such a waiver and that broad language waiving rights in the property of the other spouse is insufficient to satisfy the requirements of federal law.

The governing statutes are the provisions of the Employee Retirement Income Security Act (“ERISA”) (29 U.S.C. § 1055) and the provisions of the Internal Revenue Code which impose rules on qualified plans (26 U.S.C. § 417[a]). Under these statutes, a participant’s spouse receives survivor benefits from a qualified retirement plan even if the participant dies before reaching retirement age. A waiver by the nonparticipant spouse may be given effect only if three requirements are met: (a) the nonparticipant spouse consents in writing to a waiver; (b) the waiver designates a beneficiary (or form of benefits) which may not be changed without spousal consent (or the consent of the spouse expressly permits designations by the participant without any requirement of further consent by the spouse); and (c) the nonparticipant spouse’s consent acknowledges the effect of the waiver and is witnessed by either a plan representative or a notary public. 29 U.S.C. § 1055(c); 26 U.S.C. § 417(a).

In Hurwitz, the deceased was an attorney and the chief executive officer of a corporation which maintained a qualified profit sharing plan. Indeed, the deceased was the sole participant in the plan. The deceased was married three times, with his third wife, the defendant in the action, surviving him. Before marrying the defendant, the deceased and the defendant signed an antenuptial agreement in which each waived and released to the other any and all rights and claims arising out of the marriage with respect to property owned or to be acquired by the other party.

Nine months after the marriage, the decedent died. His son was the decedent’s sole heir under the will. The son brought suit to declare that he was the sole recipient of the death benefits provided by the profit sharing plan. The district court, affirmed by the Second Circuit, held that the widow was entitled to those benefits.

The Second Circuit held that the antenuptial agreement did not satisfy the unambiguous specifications of the federal statutes in at least two respects: the agreement did not designate a beneficiary and the agreement did not acknowledge the effect of the waiver. The Court rejected the son’s contention that the statutes were not intended to apply to antenuptial agreements.

It should be noted that the district court in Hurwitz held that an antenuptial agreement can never constitute an effective waiver under ERISA as an ERISA waiver must be made by a spouse, i.e., after the marriage occurred. The Second Circuit expressly reserved judgment as to whether an antenuptial agreement, which otherwise complies with ERISA in all respects, may constitute an effective waiver though entered into before marriage. But, it should be noted, Internal Revenue Service regulations, quoted by the Hurwitz court, maintain that an agreement entered into prior to marriage does not satisfy the consent requirements. These regulations, according to the Hurwitz court, should be followed “unless unreasonable and plainly inconsistent” with the statute. 982 F.2d at 782.

Hurwitz certainly warns the prudent practitioner to arrange to have a proper ERISA waiver executed after the marriage. It may even be advisable to insert into the antenuptial agreement a provision requiring the parties to execute (or re-execute) ERISA waivers following the marriage ceremony. While Hurwitz did leave open the possibility that an otherwise valid waiver form might pass muster though executed before the marriage, the opinion is, at best neutral on that issue. Because the statute was read strictly in Hurwitz and because the IRS regulations point to invalidity of a premarriage waiver, it would seem prudent to draft aroundHurwitz and let the issue be tested in someone else’s case.

Indeed, there is a distinct division of authority in the New York cases as to the effectiveness of a waiver in a prenuptial agreement of a future spouse’s rights under a ERISA-governed retirement plan.

The Second Department has held that a pension rights waiver in an antenuptial agreement may be enforced notwithstanding the failure to comply with the spousal consent provisions of ERISA. Moor-Jankowski v. Moor-Jankowski, 222 A.D.2d 422, 634 N.Y.S.2d 728 (2d Dept. 1995). The court reasoned that ERISA’s provisions governing spousal consents apply only to the plan participant’s current spouse, while a “qualified domestic relations order” provides the means for protecting the interests of a former spouse in pension benefits. Since prospective spouses are not mentioned in ERISA, the court held that the provisions of ERISA did not interdict the pension rights waivers set forth a prenuptial agreement between future spouses.

In contrast, the First Department has held that, under ERISA, only a spouse can waive spousal rights to employee plan benefits, that a fiancee is not a spouse, and that such rights, therefore, cannot be effectively waived in a prenuptial agreement. Richards v. Richards, 232 A.D.2d 303, 648 N.Y.S.2d 589 (1st Dept. 1996).

In drafting agreements, it may be possible to avoid the problem by including a provision in an antenuptial agreement requiring the parties to execute ERISA waivers as soon after the marriage as possible. However, in theRichards case in which the First Department held that an ERISA waiver was required, the courts held that a post-marriage request for the execution of such a waiver must be timely made. In that case, the prenuptial agreement contained a provision requiring the parties to execute “any additional documentation to confirm the consents set [forth] herein.” The difficulty was that the husband, who was the party attempting to enforce the waivers, never made a request for the wife to sign the ERISA forms until after the divorce action had commenced, and had never made such a request during the four years that the parties were married. The matrimonial court concluded that it would be contrary to equity to permit a spouse to invoke for the first time during the divorce action a contract giving him the right to designate beneficiaries of his pension plan. Richards v. Richards, 167 Misc.2d 392, 640 N.Y.S.2d 709 (Sup.Ct. N.Y. County 1995), affirmed, 232 A.D.2d 303, 648 N.Y.S.2d 589 (1st Dept. 1996). The Appellate Division, in affirming the result, did not specifically discuss this point in its memorandum. However, by remarking that it found the husband’s other arguments to be without merit, the Appellate Division surely indicated that it did not accept the husband’s arguments for reversing the Supreme Court’s decision. The lesson to be drawn from this is that an agreement should provide for the parties to execute ERISA waivers after marriage and a request for such waivers should be made as promptly as possible after the marriage. It will not do to keep the agreement in a drawer and ask for the waivers years after the fact. It may also be possible to craft a better “further instruments” clause than the one inRichards. For example, it may be prudent to include a “further instruments” clause which specifically deals with pension benefits, points out the legal issue as to the need for a post-marriage waiver, and reflects a specific, continuing promise to execute such a waiver, whenever requested. Perhaps such a specifically-worded clause would be enforced by the courts. Logically, there should be no barrier to such enforcement, if the agreement is executed in proper form and is otherwise valid.

On a different aspect of antenuptial agreements, note should be taken of the decision in Moss v. Moss, 187 A.D.2d 775, 589 N.Y.S.2d 683 (1992), appeal denied 81 N.Y.2d 709, 599 N.Y.S.2d 803, 616 N.E.2d 158. There, the court held that a clause in an antenuptial agreement which provided that the husband would not be bound by the agreement if the wife failed to “fulfill her marriage vows or obligations”, was an unenforceable “agreement to agree”. The court held that the agreement did not define the “vows or obligations” that the wife had to fulfill and ruled that there was “no universal set of vows to which all marrying couples subscribe”. As there was no evidence that parties, who were of different faiths, had a “meeting of the minds” with regard to this provision, the clause was a mere--and unenforceable--agreement to agree.

Moreover, the Moss court took note of the husband’s claim that the wife had failed to fulfill her vows because she had sought a divorce, whereas the agreement required that she remain his wife for as long as they both shall live. The court also noted that the husband had pressed the wife to sign a separation agreement. This conduct, the court wrote, placed the wife in a catch-22 situation: if she signed the agreement, she would cease to be the husband’s loving wife as long as they both lived; but if she refused to sign the agreement, she could be accused of failing to respect her husband’s wishes. The court concluded that, since the husband had provoked the wife into seeking the divorce, the husband could not use that conduct to his advantage.

Separation, antenuptial, and other marital agreements have been given additional sanction by the Equitable Distribution Law. The Equitable Distribution Law enacted entirely new ground rules, broadly applicable in matrimonial actions, governing the distribution of property acquired during marriage and awards of support. The Assembly Memorandum in support of the Equitable Distribution Law noted that “a prominent feature of this legislation is that parties before and during marriage may contract out of this system of marital property and maintenance.” The Equitable Distribution Law provides that agreements, including separation agreements, executed with the requisite formality, between spouses or prospective spouses are to be enforced in any ensuing matrimonial action between the parties. Pursuant to statute, such agreements may make provision with respect to testamentary provisions; ownership, division and distribution of property; spousal support and other terms and conditions of the marriage relationship; and child custody, care, education and maintenance. Domestic Relations Law, § 236, Part B, subd. 3. These provisions are reflective of a strong policy in favor of efforts by parties to chart their own course in resolving family disputes.

The Appellate Division, Second Department, has held that a waiver of the right to seek counsel fees contained in a prenuptial agreement may be unenforceable where the effect of the waiver would be to preclude the non-monied spouse from prosecuting or defending the matrimonial action or proceeding. Kessler v. Kessler, 33 A.D.3d 42, 818 N.Y.S.2d 571 (2nd Dept. 2006). In the case before the court, the parties litigated both the validity of the prenuptial agreement and the issue of child custody. The wife’s challenge to the validity of the agreement was rejected on its merits and the custody issue was settled on the eve of trial. The agreement provided that neither party would have any “right or claim against the other for support, alimony, attorney fees or costs”. The parties agreed that the word “support” did not mean, or include, “child support”. The Appellate Division concluded that, because “support” did not cover “child support”, there was no waiver of child support and, therefore, no waiver of an award of attorneys fees as to child support. The appellate court also noted that, under Section 237 of the Domestic Relations Law, no award could be made for the fees attributable to an unsuccessful effort to rescind or reform the prenuptial agreement. But, ruled the court, it could be against public policy to deprive the non-monied spouse of the ability to obtain proper representation on issues of equitable distribution. In the case before the court, while the agreement permitted each party to retain their separate property--a provision which protected the husband’s substantial premarital assets--the agreement did not provide for the equitable distribution of the assets accumulated during marriage. Perhaps more important, though not noted by the court, the award of counsel fees may be crucial to the ability of the non-monied spouse to obtain proper representation in custody litigation. If the non-monied spouse has limited assets, and no ability to obtain counsel fees, that spouse would be seriously disadvantaged in advocating his or her position as to custody. The Second Department ruled that whether the waiver of a fee award should be enforced should generally be determined at the conclusion of the case, because it is at trial that the court is best able to assess the circumstances of the parties at the time of the agreement, their circumstances at the time of trial, and the conduct of the parties during the litigation. However, as a practical matter, having to wait until the trial to find out if a fee award can be made may deter attorneys from undertaking the representation of the non-monied spouse, since counsel may not be able to predict whether an award may be made and, if the non-monied spouse has no or limited funds with which to pay counsel and no prospect for a large equitable distribution recovery, counsel may not be willing to undertake the risk of devoting substantial time and energy to a case where no payment will be forthcoming. Accordingly, it may be preferable for the court to permit interim awards to be made, albeit with the prospect that the monied spouse might be entitled to a credit at the end of the case for the funds paid out as against whatever equitable distribution award might otherwise have been made, should the court find that the fee waiver is enforceable.
 
C236B:12: Opting Out Agreements--The Formalities

Under the Equitable Distribution Law, an agreement by the parties made before or during marriage, to be valid and enforceable in a matrimonial action, must be in writing, subscribed by the parties, and acknowledged or proven in the manner required to entitle a deed to be recorded. Domestic Relations Law § 236, Part B, subd. 3. This requirement is substantively the same as that imposed with respect to separation agreements to be used in obtaining conversion divorces by DRL § 170 (subd. 6).

In Matisoff v. Dobi, 90 N.Y.2d 127, 659 N.Y.S.2d 209, 681 N.E.2d 376 (1997), the Court of Appeals held that a separation agreement which had been signed but not acknowledged was not enforceable in a matrimonial action. The Court held that, because the Legislature, in DRL § 236, Part B(3), had clearly prescribed acknowledgment as a condition for validity with no exception, an unacknowledged agreement is invalid and unenforceable in a matrimonial action. The Court ruled that the sworn admissions in open court by the parties that they had signed the agreement could not cure the defect. However, the Court suggested that equitable factors, such as who requested the agreement, the parties’ conduct pursuant to it, and the admission of signature, would be considered in a judicial resolution of the martial issues.

In Matisoff, the Court pointed out that DRL § 236, Part B, subdivision 3, imposes three requirements for a marital agreement to be valid and enforceable in a matrimonial action:

1) the agreement must be in writing;

2) the agreement must be subscribed by the parties; and

3) the agreement must be acknowledged or proven in the manner required to entitle a deed to be recorded.

In Matisoff, at the wife’s instigation, the parties entered into an agreement one month after their marriage. The agreement was drafted by an attorney who was a friend of the wife and contained broad, mutual waivers of various marital rights. While the agreement was signed by both parties, it was not acknowledged. In a matrimonial action brought by the wife some 13 years later, the trial court held the agreement invalid and proceeded to resolve the marital issues independently of the agreement. The Appellate Division ruled that the agreement should be enforced because it was made at the wife’s urging and because the parties had lived independent economic lives. The Court of Appeals reversed, holding that enforceability of an unacknowledged nuptial agreement should not be dependent upon the original motivation of the party challenging the agreement and whether the couple’s behavior during the marriage was consistent with the terms of the agreement.

The Court of Appeals observed that Section 236, Part B, subdivision 3, does more than import the requirements of the Statute of Frauds into the Domestic Relations Law. Rather, the equitable distribution legislation prescribes its own, more onerous requirements for a nuptial agreement to be enforceable in a matrimonial action. The statutory insistence upon proper acknowledgment serves to prevent fraud, but perhaps more importantly, the formality of acknowledgment highlights to the parties the weighty personal choices to relinquish significant property or inheritance rights, or to resolve important issues concerning child custody, education and care. By pronouncing that acknowledgment is always essential to the validity of the agreement, the Court of Appeals imposed a bright-line rule that is easy to apply and places couples and their legal advisors on clear notice of the prerequisites to a valid nuptial agreement. Spouses or prospective spouses will not need to speculate as to whether the enforceability of their agreements will be supported by their original motivation or subsequent economic relationship during the marriage. 90 N.Y.2d 127, 659 N.Y.S.2d 209, 681 N.E.2d 376 (1997).

Matisoff also rejected an argument that the unacknowledged prenuptial agreement could be salvaged by the sworn admissions of the parties at trial as to their due execution of the document. The Court pointed out that oral acknowledgment is a two-step process: (a) an oral acknowledgment is made before an authorized officer; and (b) a written certificate of acknowledgment is affixed to the agreement. In Matisoff, no certificate was affixed to the agreement.

The parties’ signatures should appear directly below the body of the agreement and above the acknowledgments. However, an agreement is not necessarily invalidated if the parties sign the agreement below the acknowledgments. SeeStanfield v. Stanfield, 100 A.D.2d 737, 473 N.Y.S.2d 734 (4th Dept. 1984). If not signed at all by the parties, or if signed but not acknowledged, a separation agreement does not comply with the statute and is void from its inception under the Equitable Distribution Law and, likewise, may not be used as a predicate for a conversion divorce. SeePacchiana v. Pacchiana, 94 A.D.2d 721, 462 N.Y.S.2d 256 (2nd Dept. 1983).

It is not necessary that the certificate of acknowledgement contain the precise language set forth in Section 309-a of the Real Property Law. Thus, where the certificate of acknowledgement was made after the 1997 amendment to that statute but used the pre-1997 statutory form, the acknowledgement was held to be in substantial compliance with the statute. Weinstein v. Weinstein, 36 A.D.3d 797, 830 N.Y.S.2d 179 (2nd Dept. 2007). The Weinstein court held that there are two aspects to an acknowledgment: the oral declaration of the signer of the document and the written certificate, generally prepared by a notary public. As long as both elements are present, the acknowledgement will be upheld. The court also rejected an effort to set aside the agreement on the basis of minor discrepancies in the date on which the agreement was executed.

Nor is it fatal to the validity of a marital agreement that the parties signed it in counterparts, meaning that each signed an original copy at a different locations and times, but did not sign a single copy, at least where the documents signed by each were identical. See Pulver v. Pulver, 40 A.D.3d 1315, 837 N.Y.S.2d 369 (3rd Dept. 2007) (antenuptial agreement). Nevertheless, it is usually prudent to provide in the agreement that it may be signed in counterparts and that the document will be valid when each party has signed it.

Where the claim of invalidation is based upon the notary having acted outside the jurisdiction in which the notary was authorized to act, the defect is to be disregarded, pursuant to the provisions of Executive Law, § 142. See Kudrov v. Kudrov, 12 Misc.3d 205, 820 N.Y.S.2d 405 (Sup.Ct. Kings County 2005) (that separation agreement was acknowledged in Florida by a New York notary did not invalidate the agreement).

The Court of Appeals in Matisoff left unresolved, whether an unacknowledged agreement can be saved by supplying the requisite acknowledgment, in proper form, under the statutory requirements at time well after the original execution of the document. The three Appellate Divisions that have considered the question have answered it in the negative.

The Appellate Division, First Department, has taken the position that it will not permit a defective acknowledgment to be cured in the midst of a matrimonial action. Anonymous v. Anonymous, 253 A.D.2d 696, 677 N.Y.S.2d 573 (1st Dept. 1998). In that case, the court stated that it would not allow a spouse to cure the absence of an acknowledgment through the production of an alleged acknowledgment in affidavit form which was executed and which surfaced some 12 years after the fact in the midst of a contested matrimonial action. The statement in the Anonymous case appeared to be dicta. It also appeared to be limited to the facts of the case. Subsequently, in Schoeman, Marsh & Updike, LLP v. Dobi, 264 A.D.2d 572, 694 N.Y.S.2d 650 (1st Dept. 1999), the court wrote that the view taken in Anonymous was intended to establish a “bright line” for distinguishing between enforceable and unenforceable agreements. According to Shoeman, March & Updike, the rule is that parties in the midst of a divorce proceeding should not be able to obtain retroactive validation of a postnuptial agreement. This declaration appears to be subject to question. The First Department’s approach would preclude any effort to demonstrate a defect in an acknowledgment as noted on the face of an agreement was purely technical. The court in the Anonymous case was suspicious of an affidavit which surfaced years after the fact, during a contested matrimonial action, particularly where it was produced, for the first time, on a motion to renew and reargue a determination that the agreement was invalid. However, it may be too cynical to presume that any and all evidence offered to cure a defective acknowledgment is so inherently incredible as to be precluded as a matter of law. Nor may it be fair to conclude that all efforts to cure are tainted merely because made during a matrimonial action. Once the parties execute an agreement, it is not uncommon for them to put it aside, and pay no attention to it, until a dispute arises which requires them to consult it. While the court’s effort to establish a “bright line” between enforceable and unenforceable agreements is commendable, it should be noted that agreements are assailed, for the first time, when an attempt is made to enforce them. TheShoeman, March & Updike case involved an attempt by the attorneys who represented the husband in Matisoff v. Dobi to recover legal fees from him. He counterclaimed against his former counsel claiming that they had committed malpractice by failing to request that the matrimonial court issue a certificate of acknowledgment of the agreement. The First Department held that there was no malpractice as such a request would not have been granted anyway.

The Appellate Division, Second Department has also held that a defect in the acknowledgment of a prenuptial agreement cannot be cured by submitting a duly executed certificate at the trial of the matrimonial action. D’Elia v. D’Elia, 14 A.D.3d 477, 788 N.Y.S.2d 156 (2nd Dept. 2005).

In Filkins v. Filkins, 303 A.D.2d 934, 757 N.Y.S.2d 665 (4th Dept. 2003), the court applied Matisoff to void a antenuptial agreement which did not have a certificate of acknowledgment attached to it when parties signed it in 1995. The court also ruled that the husband’s attempt to cure the defect by having the agreement notarized and filed after commencement of divorce action failed as the agreement was never acknowledged in accordance with the statute. While the Filkins case dealt with an antenuptial agreement, its principle should be equally applicable to separation agreements, as the statutory formality requirement is the same for both types of marital agreements.

It should also be noted that in Matisoff the Court of Appeals suggested that equitable factors, such as who requested the agreement, the parties’ conduct pursuant to it, and the admission of signature, would be considered in a judicial resolution of the martial issues. While an unacknowledged agreement may not be directly enforceable, it would seem that where the parties made an agreement, lived and abided by it, and anticipated that the agreement would be controlling, the terms of the agreement should, as a matter of equity, be given great weight in a judicial resolution of the matrimonial issues. Indeed, the courts should be especially careful not to permit either spouse to reap an unexpected, or undeserved, windfall due to a legal technicality.

Furthermore, where a party has accepted the benefits of an agreement, that party may be held be estopped from asserting that, due to defects in the execution process, the agreement is invalid. Mahon v. Moorman, 234 A.D.2d 1, 650 N.Y.S.2d 153 (1st Dept. 1996) (because husband accepted all the benefits due to him under separation agreement, he was estopped from challenging its validity on ground that it was not properly executed).

In Gubbins v. Fee, 148 Misc.2d 47, 559 N.Y.S.2d 625 (Sup.Ct. Nassau County 1990), the court was presented with an effort to enforce a pre-marriage agreement which, though signed by the parties, had not been acknowledged by them. The document did not contain any formal acknowledgement clause but did have attached a “simple notarization”. The court held that, because the document had not been properly acknowledged, and the statute requires antenuptial agreements to be acknowledged to be enforceable, the agreement could not be allowed to serve as an “opting out” agreement. The challenged agreement required the husband to transfer certain realty into the names of the parties’ jointly. Because the agreement could not be enforced, the realty would have to be dealt with as part of an equitable distribution determination.

The court did reject an attempt to invalidate the agreement under Civil Rights Law § 80-b. That statute, the so-called Anti-Heart Balm Law, abolishes causes of action for breach of promise to marry. The husband in Gubbins argued that the agreement to transfer the realty was an agreement made within contemplation of marriage and an action for its breach was within the statutory prohibition. The court rejected that claim, reasoning that, because the marriage did occur, the action was not for breach of promise to marry. The court held that Civil Rights Law § 80-b was not intended to prohibit the enforcement of otherwise valid antenuptial agreements.
 
C236B:13: Opting Out Agreements--Testamentary Provisions

The Equitable Distribution Law provides that parties to an opting out agreement may contract for the making of a testamentary provision of any kind and, conversely, for a waiver of any right to elect to take against the provisions of a will. Domestic Relations Law § 236, Part B, subd. 3 (first numbered clause of second sentence). These provisions are confirmatory of statutory provisions and case law holdings rendered prior to the enactment of the Equitable Distribution Law.

It was long held that a party to an antenuptial agreement may agree to bequeath certain property or money to the other. In re Hart, 31 A.D.2d 548, 295 N.Y.S.2d 345 (2nd Dept. 1968), appeal denied, 24 N.Y.2d 738, 300 N.Y.S.2d 1026, 248 N.E.2d 453; Matter of Estate of Young v. Hicks, 92 N.Y. 237 (1883). Thus, in Matter of Estate of Crawford, 115 Misc.2d 395, 454 N.Y.S.2d 258 (Surr.Ct. Yates County 1982), a husband was held entitled to enforce a provision of an antenuptial agreement in which the wife agreed, after her son received certain property, that the husband and the son would each receive one-half of the balance of her estate. The agreement was made in May 1978 and when the wife died in 1980, she left a will, dated in August 1979, which left all of her property to her son. It was contended by the son, who was named executor of the estate, that the husband had abandoned the wife in July, 1979 at which time the husband commenced a divorce action. The will was made by the wife approximately one month later. However, the court found that the divorce action was never completed; the parties were still married at the time of the wife’s death; and the abandonment by the husband of the wife, even if proven, was not a defense to the husband’s entitlement to enforce the provisions of the antenuptial agreement.

A provision for a bequest contained in an antenuptial agreement was likewise enforced in Matter of Duckman, 110 Misc.2d 575, 442 N.Y.S.2d 909 (Surr.Ct. Monroe County 1981). Indeed, in Duckman, the executrix of the estate was directed to bring proceedings to collect an indebtedness to the decedent in order to provide funds to meet the requirements of the antenuptial agreement. In that case, the antenuptial agreement, made in 1963, required the husband to bequeath to the wife $10,000 should the parties still be living together as husband and wife on the date of his death. When the husband died in 1980, the husband and wife were still married and living together. The difficulty, however, was that in 1970, the husband sold his interest in a business to his grandchildren for $58,000, which was secured by a promissory note signed by them. The promissory note was the only asset of the estate and the decedent’s will directed the executrix, who was apparently related to the grandchildren, to forgive the indebtedness and not to proceed in any way to collect or demand payment of the note. While the will did contain the $10,000 bequest to the wife, forgiveness of the note would prevent the wife, as a practical matter, from receiving the bequest. The court concluded that the decedent did not intend to defeat the wife’s bequest and that the law favored the interest of a widow who had bargained to receive less than her elective share of the estate. Hence, the court directed the executrix to enforce the estate’s rights in the collection of the note. She was to apply the proceeds, first, to pay debts and funeral expenses, and then, to satisfy the wife’s $10,000 bequest. Any remaining funds were to be distributed in accordance with the provisions of the will.

Although the cases above discussed involved antenuptial agreements, rather than separation agreements, the governing principles are the same.

Though the statute permits parties to separation agreements to contract to make testamentary dispositions, enforcement of such provisions is entirely another matter. Enforcement of contracts to make testamentary bequests presents practical difficulties where the assets of the decedent’s estate are insufficient to fund the debt. In the Duckman case, supra, enforcement was directed by compelling the estate to collect a debt. However, enforcement problems are usually more complex. It may be that the estate has no assets at all and, thus, the bequest is worthless. Alternatively, even if there are estate assets, those assets may not be sufficient to satisfy all claimants. For example, a conflict arises where, after a separation agreement, there is a divorce, a remarriage and the decedent’s second spouse elects to take against the decedent’s will, which would otherwise have complied with the agreement made with the first spouse. In Matter of Dunham, 63 Misc.2d 1029, 314 N.Y.S.2d 29 (Surr.Ct. Greene County 1970), affirmed, 36 A.D.2d 467, 320 N.Y.S.2d 951 (3rd Dept. 1971), appeal denied 29 N.Y.2d 485, 325 N.Y.S.2d 1025, 274 N.E.2d 753 (1971), it was held that the right of a subsequent wife to elect to take against the decedent’s will was superior to the right of a prior wife as legatee under the will, even though the legacy was pursuant to terms of the decedent’s separation agreement with his first wife. Thus, it would appear unsafe to rely upon future promises to make a testamentary disposition as part of a separation agreement. The risk can be eliminated by requiring a present transfer of assets or reduced by inserting a requirement in the agreement obligating the spouse to secure a waiver of the right of election from any subsequent spouse. Precisely such a clause was obtained, and enforced, inFell v. Fell, 213 A.D.2d 374, 623 N.Y.S.2d 315 (2nd Dept. 1995). There the parties agreed, in their separation agreement, that each party would have the right to use certain property during their lives and that the property would ultimately be left to their children. As suggested here, to prevent a subsequent spouse from interfering with the inheritance by assertion of the right of election, the parties in Fell agreed that each would obtain a waiver of the right of election from any subsequent spouse. The separation agreement was incorporated into, but did not merge with, the parties’ judgment of divorce. The husband remarried and failed to obtain the waiver. The first wife, not wishing to take any chances by waiting until the husband died, moved to compel compliance. The trial court directed the husband to obtain the waiver and awarded the first wife counsel fees, a disposition that was upheld on appeal.

The question logically arises as to what would happen if the husband’s second wife declined to sign the waiver. The easiest resolution would follow a finding that the second wife’s refusal to sign the waiver was predicated upon her obedience of the husband’s instructions. In that event, the contempt power of the court could be invoked against the husband to compel him to withdraw those instructions and issue new ones. If, however, the second wife was acting on her own, based upon her own self-interest, it would seem that the husband could not be held in contempt, since his failure to provide the waiver would not be wilful. He could presumably be cast in damages for breach of contract, with the damages being measured by the amount of property that would be taken as a consequence of the second wife’s use of the right of election. But the wife might not be a proper plaintiff, since she herself would not have sustained damage. The loss would be sustained by the children who would lose part of their inheritance to the second wife. The children might be regarded as third party beneficiaries of the contract. It could also be that no suit for damages could be brought until the first husband died since until that happened no damage would be sustained: the second wife could recant her position and sign the waiver or the second wife might die or divorce the husband, thus not having a right of election at all. The difficulties involved in enforcement of this type of clause might be avoided all together by placing the property in escrow (as discussed below) or by providing that the property is given to the children outright, with the parties reserving a life estate in specified property.

Another risk reducing device is to require that property be placed in escrow to secure performance of the terms of the agreement. Still another alternative is to provide, in lieu of or in addition to a will bequest, for an insurance policy on the life of the obligated spouse, with the other spouse, or children, to be designated irrevocable beneficiaries. While the insured spouse would still have the right to change beneficiaries and that designation would bind the insurance company, such an unpleasant surprise could be avoided by obtaining authorization in the beneficiary spouse to be notified of, or obtain documents with respect to, all insurance policy developments. Moreover, the spouse and children entitled by agreement to obtain the insurance proceeds may be able to impose a constructive trust on the proceeds should the proceeds end up in the hands of one who did not give value. SeeSimonds v. Simonds, 45 N.Y.2d 233, 408 N.Y.S.2d 359, 380 N.E.2d 189 (1978).

The Equitable Distribution Law further provides that, in a separation or other interspousal agreement, the parties may waive any right to take against the provisions of a will. Domestic Relations Law § 236, Part B, subd. 3 (first numbered clause of second sentence). A right is conferred in a surviving spouse to take against the provisions of a will by Section 5-1.1A of the Estates, Powers and Trusts Law (as to decedents dying on or after September 1, 1992). Furthermore, Section 5-3.1 provides for certain exempt property to pass directly to a surviving spouse. It should also be noted that similar or different elective rights may be afforded under the laws of other states. Such provisions of sister state law may be relevant where the parties relocate and one spouse dies and, at the time of death, was domiciled in another jurisdiction. Accordingly, if there is to be a provision in an antenuptial agreement with respect to waivers or releases of statutory inheritance rights, the language of the agreement should be broad enough to include, not only New York’s provisions, but provisions of the laws of any other relevant jurisdiction.

In drafting a separation agreement, however, the practitioner should be mindful of the holding of the Court of Appeals in Matter of Maruccia, 54 N.Y.2d 196, 445 N.Y.S.2d 73, 429 N.E.2d 751 (1981), involving a separation agreement. There, a separation agreement was entered into which contained a general release of rights in estates, including a waiver of rights to take against any will. The husband had made his will prior to the execution of the agreement and that will contained a bequest to the wife. The Court of Appeals held that the separation agreement did not revoke the prior bequest. For the bequest to be revoked, the court said, the agreement must contain a provision whereby the spouse who is the beneficiary of the bequest expressly renounces any testamentary disposition made prior to the separation agreement or which unequivocally manifests an intent on the part of both spouses that they are no longer to be beneficiaries under each other’s wills.

The lesson here is that, in drafting the separation agreement, the existing wills of each party should be reviewed and appropriate language placed into the agreement. If that is not done, after the agreement has been executed, any existing wills should be reviewed and voluntary bequests to the other spouse deleted if that is the intention of the party whose will it is. If neither is done, Maruccia holds that a general waiver of estate rights will not revoke a prior bequest. Of course, any subsequent wills must be prepared in light ofMaruccia as well.

Likewise, it has been held that a waiver of statutory inheritance rights is not a waiver of rights which may be afforded to a surviving spouse in pension or profit sharing plans. Winkler v. Bauman, 89 A.D.2d 529, 452 N.Y.S.2d 440 (1st Dept. 1982). Hence, it is appropriate to ascertain from the parties whether such plans exist, what benefits, if any, are made available to the non-employee spouse, and provide for the parties’ agreement with respect to waiver, or nonwaiver, of rights afforded to the non-employee spouse under such plans.

In this connection, attention is called to the provisions of section 5-1.1A of the Estates, Powers and Trusts Law which applies with respect to waivers of rights of election. Under the statute, a spouse may, during the lifetime of the other spouse, waive or release any right of election granted by section 5-1.1A against a particular or any last will or testamentary substitute of made by the other spouse. A waiver or release of all rights in the estate of the other spouse is a waiver or release of a right of election against any such last will or testamentary provision. EPTL 5-1.1(e)(1).

To be effective, a waiver or release must be in writing and subscribed by the maker thereof, and acknowledged or proven in the manner required by the laws of New York for the recording of a conveyance of real property. EPTL 5-1.1A(e)(2). Hence, an agreement which complies with the formality requirements of the Equitable Distribution Law as to antenuptial or separation agreements also complies with this EPTL section.

The EPTL provides, in addition, however, that a waiver or release, if proper as to form, is effective according to its terms, whether or not: (a) executed before or after the marriage; (b) executed before or after September 1, 1966; (c) unilateral in form and executed only by the maker or bilateral in form and executed by both spouses; and (d) executed with or without consideration; and (e) absolute or conditional. EPTL 5-1.1A(e)(3).

Support payments terminate upon the death of the payor spouse. See, e.g., DRL § 236, Part B, subd. 1(a); DRL § 248. However, nothing prevents a spouse from agreeing that his or her estate will continue making support payments to a dependent spouse after the death of the payor spouse. Of course, whether the payor is willing to bind his or her estate is dependent upon the other terms and conditions of the agreement. It is usually preferable for the dependent spouse to be designated beneficiary of life insurance on the life of the payor spouse. In that way, upon the death of the payor spouse, the payee spouse will have the security of payment from an insurance company and would not have to rely upon the estate of the payor spouse to make periodic payments. However, if adequate life insurance is not available and there is reason to believe that the payor’s estate will have sufficient assets to make good on the post-death support payments, the payee spouse might seek to bind the estate to make such payments. Clearly, it is best if the agreement explicitly provides for continuation or termination of payments upon the death of the payor. However, if the agreement does not explicitly provide for termination of spousal support upon the death of the payor spouse, or explicitly provide for a continuation of payments, the court will have to determine the intent of the parties based upon the document as a whole in light of the parties’ particularized circumstances. Matter of Riconda, 90 N.Y.2d 733, 665 N.Y.S.2d 392, 688 N.E.2d 248 (1997). Riconda held that, because the agreement provided for maintenance payments to cease only upon the death or remarriage of the wife and did not provide for the possibility of the husband predeceasing the wife, an issue of fact existed as to the intent of the parties.
 
C236B:14: Opting Out Agreements--Property Settlements.

Prior to the enactment of the Equitable Distribution Law, it was held that the parties to a separation agreement could properly provide for a disposition of their respective property rights, even where the provisions made differed from those which would have been imposed by courts operating on the basis of the form of legal title. In Christian v. Christian, 42 N.Y.2d 63, 396 N.Y.S.2d 817, 365 N.E.2d 849 (1977), the Court of Appeals stated that parties are to be encouraged to settle their own differences in connection with the negotiation of property settlement provisions. However, the focus of the law upon the form of title was an inhibiting factor with respect to the negotiation of property settlements. A title holding spouse often had little incentive to agree to a property provision which recognized an interest by the non-title holding spouse in the subject property, except where the grant of such an interest would offset other claims by the non-title holding spouse.

The Equitable Distribution Law has entirely recast the principles governing property distribution between spouses following termination of the marriage. In lieu of former title principles, the courts are empowered to equitably distribute marital property. See Domestic Relations Law § 236, Part B, subd. 5. Marital property includes all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held. Domestic Relations Law § 236, Part B, subd. 1(c). However, marital property does not include separate property. Id. Separate property means: property acquired before marriage; property acquired by bequest, devise, or descent; property acquired by gift from a party other than the spouse; compensation for personal injuries; and property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse. Domestic Relations Law § 236, Part B, subd. 1(d), pars. (1), (2), (3).

However, the Equitable Distribution Law confers upon the parties a broad power to opt out of this system of property distribution by mutual agreement. Hence, the statute authorizes separation and other interspousal agreements, to make “provision for the ownership, division, or distribution of separate and marital property”. Domestic Relations Law § 236, Part B, subd. 3 (second numbered clause of second sentence). The parties may agree to define property as marital property, where the statute would define that property as separate property. Conversely, the parties may agree to define property as separate property while the statute would treat that property as being marital property. Where the parties have by agreement described property as separate property, the statute provides that such property is to be treated by the court as separate property. Domestic Relations Law § 236, Part B, subd. 1(d)(4). A provision made by the parties in a valid separation agreement for the distribution of their property interests is enforceable and the court may not, in the presence of such an agreement, apply the statutory equitable distribution principles. Domestic Relations Law § 236, Part B, subd. 5(a).

The parties are afforded a great deal of flexibility in adjusting their own property rights and interests. They could agree that specific identified property is to remain the separate property of one spouse; they may agree that specific identified property is to be regarded as marital property; and they may provide for time, method, and proportion of distribution of any property, no matter how classified.

Note that there is a distinct division of authority in the New York cases as to the effectiveness of a waiver in a prenuptial agreement of a future spouse’s rights under a retirement plan governed by the federal Employee Retirement Income Security Act (“ERISA”) (29 U.S.C. § 1055). Under ERISA, and the provisions of the Internal Revenue Code which impose rules on qualified plans (26 U.S.C. § 417[a]), a waiver by the nonparticipant spouse may be given effect only if three requirements are met: (a) the nonparticipant spouse consents in writing to a waiver; (b) the waiver designates a beneficiary (or form of benefits) which may not be changed without spousal consent (or the consent of the spouse expressly permits designations by the participant without any requirement of further consent by the spouse); and (c) the nonparticipant spouse’s consent acknowledges the effect of the waiver and is witnessed by either a plan representative or a notary public. 29 U.S.C. § 1055(c); 26 U.S.C. § 417(a).

The Second Department has held that a pension rights waiver in a antenuptial agreement may be enforced notwithstanding the failure to comply with the spousal consent provisions of ERISA. Moor-Jankowski v. Moor-Jankowski, 222 A.D.2d 422, 634 N.Y.S.2d 728 (2nd Dept. 1995). The court reasoned that ERISA’s provisions governing spousal consents apply only to the plan participant’s current spouse, while a “qualified domestic relations order” provides the means for protecting the interests of a former spouse in pension benefits. Since prospective spouses are not mentioned in ERISA, the court held that the provisions of ERISA did not interdict the pension rights waivers set forth a prenuptial agreement between future spouses.

In contrast, the First Department has held that, under ERISA, only a spouse can waive spousal rights to employee plan benefits, that a fiancee is not a spouse, and that such rights, therefore, cannot be effectively waived in a prenuptial agreement. Richards v. Richards, 232 A.D.2d 303, 648 N.Y.S.2d 589 (1st Dept. 1996).

In drafting agreements, it may be possible to avoid the problem by including a provision in an antenuptial agreement requiring the parties to execute ERISA waivers as soon after the marriage as possible. However, in the Richards case in which the First Department held that an ERISA waiver was required, the courts held that a post-marriage request for the execution of such a waiver must be timely made. In that case, the prenuptial agreement contained a provision requiring the parties to execute “any additional documentation to confirm the consents set [forth] herein.” The difficulty was that the husband, who was the party attempting to enforce the waivers, never made a request for the wife to sign the ERISA forms until after the divorce action had commenced, and had never made such a request during the four years that the parties were married. The Supreme Court concluded that it would be contrary to equity to permit a spouse to invoke for the first time during the divorce action a contract giving him the right to designate beneficiaries of his pension plan. Richards v. Richards, 167 Misc.2d 392, 640 N.Y.S.2d 709 (Sup.Ct. N.Y. County 1995), affirmed, 232 A.D.2d 303, 648 N.Y.S.2d 589 (1st Dept. 1996). The Appellate Division, in affirming the result, did not specifically discuss this point in its memorandum. However, by remarking that it found the husband’s other arguments to be without merit, the Appellate Division surely indicated that it did not accept the husband’s arguments for reversing the Supreme Court’s decision. The lesson to be drawn from this is that an agreement should provide for the parties to execute ERISA waivers after marriage and a request for such waivers should be made as promptly as possible after the marriage. It will not do to keep the agreement in a drawer and ask for the waivers years after the fact. It may also be possible to craft a better “further instruments” clause than the one in Richards. For example, it may be prudent to include a “further instruments” clause which specifically deals with pension benefits, points out the legal issue as to the need for a post-marriage waiver, and reflects a specific, continuing promise to execute such a waiver, whenever requested. Perhaps such a specifically-worded clause would be enforced by the courts. Logically, there should be no barrier to such enforcement, if the agreement is executed in proper form and is otherwise valid.
 
C236B:15: Spousal Maintenance and Lump Sum Settlements

The Equitable Distribution Law has made a major change in respect of the parties’ ability to contract, in an opting out agreement, with respect to support obligations and rights. The changes brought about by the Equitable Distribution Law, and a simultaneous amendment to the General Obligations Law, have given the parties great flexibility to determine their own respective spousal support rights and liabilities.

Prior to the enactment of the Equitable Distribution Law, while the parties could contract with respect to support rights, by statute a husband could not contract to be relieved of his duty to support his wife and a wife could not contract to be relieved of her duty to support her husband, which duty was triggered if she had sufficient means and he was incapable of supporting himself and was or was likely to become a public charge. Former General Obligations Law § 5-311. These statutory provisions were long held to preclude any waiver of a wife’s right to support, even if the waiver was coupled with a lump sum payment or other limited alimony. See, e.g., Haas v. Haas, 298 N.Y. 69, 80 N.E.2d 337 (1948); Kyff v. Kyff, 286 N.Y. 71, 35 N.E.2d 655 (1941). A provision in a separation agreement which purported to relieve a husband from any future obligation to support his wife was void and unenforceable. E.g., Kolmin v. Kolmin, 65 A.D.2d 928, 410 N.Y.S.2d 447 (4th Dept. 1978); Krochalis v. Krochalis, 53 A.D.2d 1010, 386 N.Y.S.2d 266 (4th Dept. 1976). An agreement which would relieve the husband of an obligation to support his wife after 5 years, unless she died sooner or remarried, was held to be an impermissible support waiver; however, the wife could not challenge the agreement and seek further support until 5 years passed without her having died or remarried. Bervy v. Bervy, 67 A.D.2d 754, 412 N.Y.S.2d 213 (3rd Dept. 1979). Likewise, agreements which provided for a lump sum settlement and which were silent on the issue of spousal support were held violative of the then statutory provisions. See, e.g., Lamberti v. Lamberti, 51 A.D.2d 747, 379 N.Y.S.2d 464 (2nd Dept. 1976); Henderson v. Henderson, 63 A.D.2d 853, 405 N.Y.S.2d 857 (4th Dept. 1978), appeal dismissed, 45 N.Y.2d 713, 411 N.Y.S. 1027, 383 N.E.2d 1162. On the other hand, since the pre-equitable distribution law governing alimony automatically divested a wife of standing to seek support for herself if she was found to have committed conduct which would entitle her husband to matrimonial relief (see section 236 of the Domestic Relations Law, Part A, subd. 1), it was permissible, where the husband was found entitled to matrimonial relief, for the husband to waive his statutory right to disentitle the wife from support, with the wife’s support rights being limited to the extent of the waiver. Moran v. Moran, 81 A.D.2d 740, 438 N.Y.S.2d 421 (4th Dept. 1981); Vranick v. Vranick, 41 A.D.2d 663, 340 N.Y.S.2d 566 (2nd Dept. 1973). To the extent that a limitation on the wife’s right to support was in the context of a fault decree issued in favor of the husband, it was possible for the limitation to avoid the strictures of former General Obligations Law § 5-311. Thus, in Vranick v. Vranick, supra, the court upheld a limitation upon the wife’s right to support to 3 years where the husband obtained a fault divorce. But seeKolmin v. Kolmin, 65 A.D.2d 928, 410 N.Y.S.2d 447 (4th Dept. 1978) (alimony waiver contained in separation agreement incorporated into dual divorce judgment held unenforceable) and Henderson v. Henderson, 63 A.D.2d 853, 405 N.Y.S.2d 857 (4th Dept. 1978), appeal dismissed, 45 N.Y.2d 713, 411 N.Y.S.2d 1027, 383 N.E.2d 1162 (lump sum settlement, silent as to support, held void though dual divorces granted).

In Greschler v. Greschler, 71 A.D.2d 322, 422 N.Y.S.2d 718 (2nd Dept. 1979), modified on other grounds, 51 N.Y.2d 368, 434 N.Y.S.2d 194, 414 N.E.2d 694 (1980), the Appellate Division, Second Department ruled that former General Obligations Law § 5-311 was an unconstitutional gender based discrimination. The Court of Appeals, however, did not pass on the constitutional issue, upholding the agreement on the narrower ground that it had been incorporated into an unimpeached, and recognizable foreign divorce judgment.

Following the Appellate Division’s decision in Greschler, the courts upheld lump sum agreements made before the effective date of the Equitable Distribution Law. It was held that the Greschler decision voiding the statutory prohibition against such agreements, when coupled with support waivers, was to be retroactively applied. See, e.g., Kember v. Kember, 77 A.D.2d 646, 430 N.Y.S.2d 382 (2nd Dept. 1980); Goldring v. Goldring, 73 A.D.2d 955, 424 N.Y.S.2d 270 (2nd Dept. 1980); see, also, Estabrook v. Estabrook, 104 Misc.2d 16, 427 N.Y.S.2d 541 (Sup.Ct. Columbia County 1980). The decisions giving retroactive effect to the Second Department’s holding in Greschler were undercut in theory by the refusal by the Court of Appeals, when it considered the Greschler case, to concur that the former provisions of the General Obligations Law § 5-311 were unconstitutional. Nonetheless, as discussed below, lump sum agreements made before the Equitable Distribution Law are still to be upheld, but on a different theory. Because the General Obligations Law provision reflects public policy and the statutory provisions have since been liberalized, it is proper to salvage lump sum agreements made before July 19, 1980 on the basis of current, not past, public policy.

Pursuant to the Equitable Distribution Law, the parties to a valid separation agreement may make provision “for the amount and duration of maintenance”, maintenance being the new statutory term for spousal support. Domestic Relations Law § 236, Part B, subd. 3 (third numbered clause of second sentence); subd. 1 (par. a). However, certain important limitations are imposed on the parties’ ability to contract with respect to spousal support.

One of these important limitations is that set forth in the amended version of General Obligations Law § 5-311. The revised GOL § 5-311 contains a prohibition against contracting for altering or dissolving the marriage but provides that an agreement between a husband and wife shall not be considered a contract to alter or dissolve a marriage unless it contains an express provision requiring dissolution or provides for the procurement of divorce grounds. Further, the husband and wife are barred only from relieving each other of the liability to support the other in such a manner that he or she will become incapable of self-support and likely to become a public charge. While the wording of the revised statute is awkward, the intent is clear: both spouses have equal duties to support the other and those duties can not be waived effectively at least where the needy spouse cannot be self supporting and is likely to require public assistance. SeeGreschler v. Greschler, supra, 51 N.Y.2d 368, 434 N.Y.S.2d 194, 414 N.E.2d 694, wherein Judge Jasen construed the revised statute as permitting both spouses to waive their right to support “as long as he or she is not likely to become a public charge.” At that point, the statute insists that the other spouse, not the taxpayer provide support.

The net result is that an “opt out” agreement may not strip either party of the duty to support the other in the event of extreme hardship and may not directly provide for the procurement of a divorce. However, both spouses can waive their right to support unless he or she is likely to become a public charge. For example, in Lasky v. Lasky, 163 Misc.2d 859, 622 N.Y.S.2d 649 (Sup.Ct. Westchester County 1994), affirmed, 216 A.D.2d 366, 628 N.Y.S.2d 532 (2nd Dept. 1995), the court granted temporary maintenance to the former wife, though the period of durational maintenance provided in the parties’ separation agreement and divorce judgment had expired, because the wife had become a public charge.

In Goldfarb v. Goldfarb, 86 A.D.2d 459, 450 N.Y.S.2d 212 (2nd Dept. 1982), the court was confronted with a case in which, after the effective date of the legislative change, a wife sought to invalidate an old law agreement on the ground that it violated the former G.O.L. section. The court had to decide what law applied--if the governing law was the statute as it existed when the agreement was signed, the agreement was invalid; if the applicable law was the present statute, the agreement would be upheld. The court resolved the question by applying the amended statute and upholding the agreement. The court reasoned that the G.O.L. section was a measure of public policy and current public policy, not past, would apply.

The court also noted that the amended statute would be applied to bar challenges to agreements which were based upon the former law. However, the fact that the law was amended could not be used as a basis for seeking to invalidate the agreement.

In this regard, it is important to note that the last sentence of subdivision 3 provides that nothing set forth in this subdivision should be deemed to affect the validity of agreements made before the statutory effective date of July 19, 1980. This means that the statute is neutral to such agreements--it neither validates nor invalidates them. All questions concerning the validity of such agreements, other than that resolved in Goldfarb, should be governed by the legal principles applicable as of July 18, 1980. Sansanelli v. Sansanelli, 122 Misc.2d 512, 471 N.Y.S.2d 775 (Sup.Ct. Nassau County 1984).

A second important limitation is the requirement imposed in clause 3 of the second sentence of subdivision 3 of Part B of Section 236 of the Domestic Relations Law. That clause provides that the terms of the “opt out” agreement must be “fair and reasonable at the time of the making of the agreement” and that the terms are not “unconscionable at the time of entry of final judgment”.

This phrase appears only in clause 3. However, it has been suggested that it was intended by the draftspersons to apply to all four Clauses in subdivision 3, and the more limited wording was due to a clerical error. On the other hand, it has also been observed that the use of the precise numbering of clauses may leave little room for construction and, since the fair and reasonable and not unconscionable phrase appears only in clause 3 and not in any other clause, the application of the phrase could be limited to clause 3. In Pennise v. Pennise, 120 Misc.2d 782, 466 N.Y.S.2d 631 (Sup.Ct. Nassau County 1983), the court took a nuanced view of the statutory intent. In that case, the wife sought to vacate an agreement which stripped her of her interest in a business formerly owned jointly by her and her husband. The court concluded that the Legislature did not intend to abrogate the holding of the Court of Appeals in the Christian v. Christian, 42 N.Y.2d 63, 396 N.Y.S.2d 817, 365 N.E.2d 849 (1977), which permits the courts to decline to enforce unconscionable marital agreements. The Pennise court read the statute as allowing all agreements, not just maintenance clauses, as being subject to review for unconscionability. However, it concluded that the “fair and reasonable” standard applies only to maintenance clauses. This view has found general acceptance. See Goldman v. Goldman, 118 A.D.2d 498, 500 N.Y.S.2d 111 (1st Dept. 1986); Cantamessa v. Cantamessa, 170 A.D.2d 792, 565 N.Y.S.2d 895 (3rd Dept. 1991); Dwyer v. Dwyer, 190 Misc.2d 319, 737 N.Y.S.2d 806 (Sup.Ct. Onondaga County 2001).

In Christian, the Court of Appeals dealt with a property settlement that the Appellate Division found to be so unconscionable as to be unenforceable. In sending the case back for a new hearing, Judge Cooke, speaking for the Court, noted that separation agreements are subject to strict surveillance and the courts should not enforce any agreement which was the product of overreaching or inequity. While theChristian Court referred to definitions of unconscionability, it did not flatly hold that unconscionability standing alone was sufficient to void an agreement. Rather, Christian held that, while no actual fraud need be shown to void an agreement, it was necessary to ascertain whether there had been overreaching.

The unconscionability doctrine was applied to nullify a separation agreement in Weinstock v. Weinstock, 167 A.D.2d 394, 561 N.Y.S.2d 807 (2nd Dept. 1990), appeal dismissed 77 N.Y.2d 874, 568 N.Y.S.2d 916, 571 N.E.2d 86, reargument denied 77 N.Y.2d 940, 569 N.Y.S.2d 614, 572 N.E.2d 55. There, the husband, an attorney, had his wife of 22 years sign an agreement under which she waived all rights to seek equitable distribution of his assets--assets which exceeded $2,000,000. In addition, the agreement limited the wife to a less than substantial maintenance award, which was conditioned on her simultaneously working and attending college. The wife was required to transfer her share in the marital home to the husband and to give him a broad power of attorney to sign her name to papers required to give effect to the agreement. The wife was even induced to co-sign a loan, the proceeds of which were kept by the husband. The wife’s psychiatrist testified that the husband was a controlling, dominant person and that the wife was very self-effacing and compliant. The psychiatrist testified further that, in his opinion, the wife was emotionally dependent upon the husband. Indeed, the wife had limited knowledge of financial matters.

Based on all of these facts, the court held that the agreement was so manifestly unfair, and the apparent product of coercion and overreaching on the husband’s part, that it was void ab initio.
 
C236B:16: Opting Out Agreements--Child Custody Provisions.

The Equitable Distribution Law permits parties to a separation agreement to make provision for the custody, care, education and maintenance of any child of the parties, subject to the provisions of section 240 of the Domestic Relations Law. Domestic Relations Law § 236, Part B, subd. 3 (fourth numbered clause of second sentence). Section 240 of the Domestic Relations Law grants the court the authority in matrimonial actions, in proceedings by writ of habeas corpus, and in proceedings commenced by petition and order to show cause, to make direction as between the parties for the custody, care, education, and maintenance of any child of the parties, as in the court’s discretion justice requires, having regard to the circumstances of the case and of the respective parties and to the best interests of the child. In short, the parties’ ability to contract in a separation agreement with respect to matters affecting children is subject to the supervisory role of the court.

In terms of custody, even before the enactment of the Equitable Distribution Law, it was well accepted that parents could never dispositively contract with respect to custody matters since, where the best interests of the child requires a custodial arrangement different from that provided for by agreement, the court may disregard the agreement. Agur v. Agur, 32 A.D.2d 16, 298 N.Y.S.2d 772 (2nd Dept. 1969), appeal dismissed 32 N.Y.2d 703, 343 N.Y.S.2d 607, 296 N.E.2d 458. No agreement as to custody may bind the court as to render inoperable its supervisory power. People ex rel. Wasserberger v. Wasserberger, 42 A.D.2d 93, 345 N.Y.S.2d 46 (1st Dept. 1973), affirmed, 34 N.Y.2d 660, 355 N.Y.S.2d 580, 311 N.E.2d 651 (1974); see alsoTropea v. Tropea, 87 N.Y.2d 727, 642 N.Y.S.2d 575, 665 N.E.2d 145 (1996).

While no agreement can bind the court to a custody disposition other than one which is based upon an assessment of the child’s best interests, weight may be given to the priority created by virtue of that agreement. Eschbach v. Eschbach, 56 N.Y.2d 167, 451 N.Y.S.2d 658, 436 N.E.2d 1260 (1982). The priority created by virtue of an initial custody determination, such as a custody determination made by voluntary agreement between parents, arises from the conception that stability in a child’s life is in the child’s best interests and that a prior determination, including one made by agreement, reflects a considered and experienced judgment concerning all of the factors involved. Friederwitzer v. Friederwitzer, 55 N.Y.2d 89, 447 N.Y.S.2d 893, 432 N.E.2d 765 (1982). However, when the court is requested to modify a prior custodial arrangement, the priority to be given to stability is but one of several factors to be considered and, in fact, an agreement which was so contradictory of considered judgment as to merely determine custody on the basis of the child’s wishes, is not even a weighty factor. Friederwitzer v. Friederwitzer, supra.

In entering into a separation agreement, the parties may agree, subject to the supervisory powers of the court, with respect to custody and visitation. The parties may agree to confer custody upon one parent and fix the visitation rights of the other parent. Alternatively, the parties may agree to a joint custody arrangement and may define the meaning and scope of that arrangement. SeeBraiman v. Braiman, 44 N.Y.2d 584, 407 N.Y.S.2d 449, 378 N.E.2d 1019 (1978). However, the court may convert a joint custody arrangement into a single custody arrangement where the circumstances and the best interests of the child so require. See, e.g., Munford v. Shaw, 84 A.D.2d 810, 444 N.Y.S.2d 137 (2nd Dept. 1981), appeal denied 55 N.Y.2d 606, 448 N.Y.S.2d 1025, 433 N.E.2d 536; Matter of Oseid v. Daugherty, 254 A.D.2d 600, 678 N.Y.S.2d 817 (3rd Dept. 1998).

A significant decision with respect to the judicial authority over custody agreements was made in Charatan-Berger v. Berger, 158 A.D.2d 426, 551 N.Y.S.2d 525 (1st Dept. 1990). There, the parties, during the course of a custody hearing, entered into a stipulation pursuant to which the husband would be awarded custody of the parties’ child. However, within days of that agreement, the wife “disavowed” it and the custody hearing resumed. The wife sought to stay enforcement of the stipulation, a request which the trial court granted. The Appellate Division, however, set the stay aside by a vote of 4-1. The Appellate Division majority held that the stipulation was enforceable since it satisfied the requirements of CPLR 2104 (writing signed by the parties and counsel) and judicial policy in this State is to favor the enforcement of stipulations. That the stipulation was valid and enforceable, however, did not prevent the court from continuing the custody hearing to determine the child’s best interest. It appears that, while the court did not view the agreement as foreclosing judicial scrutiny of the best interest issue, it did not see a proper basis for staying the agreement, pending the conclusion of the custody hearing.

Also worthy of note is Senior v. Senior, 152 A.D.2d 784, 543 N.Y.S.2d 564 (3rd Dept. 1989) wherein the court gave legal effect to an undisputed term of an oral agreement between the parties pursuant to which the child was to live with the father for at least a certain length of time (other terms were disputed).

One of the developing areas of custody law--and one of considerable importance in a mobile society--concerns the principles to be applied where one parent seeks to relocate with a child. The issue has received considerable treatment in recent years, including two major decisions of the Court of Appeals: Weiss v. Weiss, 52 N.Y.2d 170, 436 N.Y.S.2d 862, 418 N.E.2d 377 (1981) and Tropea v. Tropea, 87 N.Y.2d 727, 642 N.Y.S.2d 575, 665 N.E.2d 145 (1996).

Weiss is of significance in the separation agreement context because it contains some points regarding traditional boilerplate agreement language. In the Weiss case a separation agreement, placing custody of the parties’ son in the mother, was entered into and was incorporated into a New York divorce judgment. Some 5 years later, the wife desired to move from New York State to Las Vegas, claiming that the move would relieve her of social and economic pressures. The father applied for a court order restraining the move. The father relied upon provisions in the separation agreement which conferred fairly generous visitation privileges, arguing that the relocation to Las Vegas would make his exercise of such privileges more difficult, if not impossible. On the other hand, the mother relied upon the clause in the agreement authorizing the parties to continue to live separate and apart at such places as they each may choose. She contended that the absence of any jurisdictional or geographical restriction in the clause freed her from any requirement of remaining in New York State. The Court of Appeals, affirming the Appellate Division, ruled that the move, not prompted by any exceptional needs or requirements, should be enjoined as interfering unduly with the father’s visitation rights. With respect to the residency clause in the agreement, the Court of Appeals suggested that the clause was boilerplate language primarily intended to memorialize the fact that the parties were to respect their separated state. Moreover, the Court noted that it did not make any reference to the child. The visitation provisions would be rendered illusory if the residence clause was to be read as if it stood alone.

The Weiss case illustrates the desirability of including language in a separation agreement that provides for the rights and obligations of the parties in the event that, in the future, one or both parents desire to relocate to a more distant geographic area than the residential areas occupied at the time of the making of the agreement.

On the other hand, in Tropea v. Tropea, supra, the Court of Appeals indicated that relocation provisions contained in marital agreements are not conclusive on the court, as the court may determine that, despite the terms of the agreement, the relocation at issue is or is not in the best interests of the child. The terms of the parents’ agreement are a factor that the court should consider in making its own determination of the best interests issue. See Scheinkman, New York Law of Domestic Relations, § 22.11 (West).

The enforceability of absolute restrictions on relocation is always pragmatic since the court may refuse to enforce such a prohibition where it finds that the restriction is contrary to the child’s best interest. Agreements may steer away from imposing absolute restrictions and, instead, require advance notice of any intention to relocate. A clause which requires notice is a safeguard against a secret relocation by ensuring that the parties will have an opportunity to either resolve any differences or obtain a judicial determination before unilateral action is taken.

A separation agreement may also contain provisions relating to the religious upbringing and education of children. An agreement that requires children to be raised or educated in a particular religious lifestyle is valid and may be enforced, provided that the agreement is in the best interests of the children. Perlstein v. Perlstein, 76 A.D.2d 49, 429 N.Y.S.2d 896 (1st Dept. 1980). Such agreements are to be enforced unless the party who seeks to avoid the agreement can demonstrate that enforcement of the agreement is not in the best interests of the child. Perlstein v. Perlstein, supra; Gruber v. Gruber, 87 A.D.2d 246, 451 N.Y.S.2d 117 (1st Dept. 1982). In the Gruber case, a separation agreement required that the children attend a religious school until completion of 12th grade, with the custodial mother not to enroll the children in any school without the father’s consent. After some years, the mother removed the children from religious school and enrolled them in public school. The Court, in enforcing the agreement, directed the return of the children to a full-time religious school.
 
C236B:17: Opting Out Agreements--Child Support Provisions

The Equitable Distribution Law permits parties to a separation agreement to make provision for the custody, care, education and maintenance of any child of the parties, subject to the provisions of section 240 of the Domestic Relations Law. Domestic Relations Law § 236, Part B, subd. 3 (fourth numbered clause of second sentence). Section 240 of the Domestic Relations Law grants the court the authority in matrimonial actions, in proceedings by writ of habeas corpus and in proceedings commenced by petition and order to show cause, to make direction as between the parties for the custody, care, education, and maintenance of any child of the parties, as in the court’s discretion justice requires, having regard to the circumstances of the case and of the respective parties and to the best interests of the child, and subject to the provisions of the Child Support Standards Act. In short, the parties’ ability to contract in a separation agreement with respect to matters affecting children is subject to the supervisory role of the court. The requirements imposed by the Child Support Standards Act upon child support agreements are considered in the Practice Commentaries to DRL § 240.

Pursuant to section 413 of the Family Court Act, as gender neutralized by the Equitable Distribution Law, both parents of a child under age 21 are chargeable with the support of such child. Even before the statutory amendments which eliminated the former principles imposing primary liability for child support upon fathers and only secondary liability upon mothers, the courts held that both parents are chargeable with the support of their children on an equal basis, but with the amount of support to be dependent upon the parties’ respective financial circumstances. See, e.g., Carter v. Carter, 58 A.D.2d 438, 397 N.Y.S.2d 88 (2nd Dept. 1977); Tessler v. Siegel, 59 A.D.2d 846, 399 N.Y.S.2d 218 (1st Dept. 1977). Such holdings were a reinterpretation of former sections 413 and 414 of the Family Court Act, needed to save those statutes from being declared an unconstitutional gender based discrimination. SeeOrr v. Orr, 99 S.Ct. 1102, 440 U.S. 268, 59 L.Ed.2d 306 (1979).

A separation agreement may not effectively release either parent from the statutorily imposed obligation to support children under the age of 21. See, e.g., Matter of Hoppl v. Hoppl, 50 A.D.2d 59, 376 N.Y.S.2d 524 (1st Dept. 1975),affirmed 40 N.Y.2d 993, 391 N.Y.S.2d 106, 359 N.E.2d 700; Matter of Davidow v. Davidow, 97 Misc.2d 220, 410 N.Y.S.2d 989 (Family Court Richmond County 1978); Belaustegui v. Belaustegui, 85 Misc.2d 1015, 380 N.Y.S.2d 950 (Sup.Ct. Queens County 1976). Agreements that purport to reduce or eliminate either parent’s statutory support duty or which are silent as to child support are unenforceable. See, e.g., Matter of Jentoft-Nilsen v. Jentoft-Nilsen, 109 Misc.2d 12, 439 N.Y.S.2d 610 (Family Court Delaware County 1981). However, an agreement which requires only the non-custodial parent to pay child support is not to be read as violative of the statutory policy. Rather, it is implied that, to the extent the child’s needs exceed the support paid by the non-custodial spouse, such needs are met by the custodial parent. If the child’s needs are not being met by either parent, as discussed below, a modification with respect to child support may be decreed by the courts. Parents may agree as between themselves with respect to their respective obligations to support the child, provided that the child’s ultimate right to support is not diminished. Matter of Brescia v. Fitts, 56 N.Y.2d 132, 451 N.Y.S.2d 68, 436 N.E.2d 518 (1982).

While the court may modify the child support provisions of a judgment or court order, it may not modify the child support provisions contained in an agreement which was not merged into the judgment or order. Where the court modifies a judgment or order to increase child support above the amount set in an agreement, the agreement usually becomes irrelevant. However, where the court decreases the child support provisions of a judgment or order below the amount fixed in the agreement, the court may not deprive the custodial parent of the contractual rights of the agreement. Cefola v. Cefola, 231 A.D.2d 600, 647 N.Y.S.2d 810 (2nd Dept. 1996).

It is commonplace for separation agreements to provide for events under which child support payments may be terminated. However, such provisions may not be enforced where termination is not authorized by law. Hence, a provision in a separation agreement which purports to permit a parent to terminate child support payments at age 18, rather than at age 21, is unenforceable, unless the child is found to be legally emancipated. Davidow v. Davidow, 97 Misc.2d 220, 410 N.Y.S.2d 989 (Family Court Richmond County 1978).
 
C236B:18: Open Court Stipulations of Settlement

There is a practice, where a matrimonial dispute has given rise to litigation, of memorializing a settlement, not by written agreement, but by the oral dictation of the settlement terms in open court, with the agreement being recorded by the court stenographer. Such a practice is not unique to matrimonial actions. CPLR 2104 holds that an agreement between parties or their attorneys relating to any matter in an action, while usually required to be a subscribed writing, is enforceable if made between counsel in open court or if reduced to the form of an order and entered. The validity of open court matrimonial stipulations has divided the Appellate Divisions. As detailed hereinafter, the Third and Fourth Departments have held that such stipulations are not valid, in view of certain language in the Equitable Distribution Law. The First and Second Departments hold that such stipulations are valid and enforceable.

Subdivision 3 of Part B of Domestic Relations Law section 236 provides that an agreement between the parties made before or during the marriage is valid and enforceable in a matrimonial action if the agreement is in writing, subscribed by the parties, and is acknowledged or proven. The statute was designed to allow the parties to resolve by mutual agreement the important personal and economic issues that are attendant upon dissolution of the marriage. The statute contemplates agreements made before the marriage or during the marriage and holds that such agreements may be enforced in a marital action between the parties. The statute clearly speaks to an antenuptial agreement and to a separation agreement which is made before a matrimonial action is commenced. Such agreements, clearly, must be in writing and appropriately acknowledged or proved. Absent a writing and appropriate execution formalities, there would be grave dangers, and possibly fraud, inherent in claims based upon alleged oral agreements.

Not all matters, however, are resolved before a matrimonial action is commenced. However, where a settlement is reached at a pretrial stage of action as the result of out-of-court negotiations, a formal written stipulation of settlement or separation agreement is prepared and executed. Yet it not infrequently happens that a settlement is reached in court, perhaps with the assistance of the assigned judge. In the pre-equitable distribution days, it was common practice for the attorneys to dictate a stipulation into the transcript of the proceedings. Such stipulations have long been viewed as constituting valid and binding agreements, even though a formal written document was not signed by the parties. E.g., Ariel v. Ariel, 5 A.D.2d 168, 171 N.Y.S.2d 138 (1st Dept. 1958), reargument and appeal denied 5 A.D.2d 981, 173 N.Y.S.2d 984; CPLR 2104. In fact, it was held that relief from such a stipulation could be obtained only upon a showing of good cause, such as collusion, fraud, mistake, or accident. E.g., Reinfurt v. Reinfurt, 67 A.D.2d 968, 413 N.Y.S.2d 458 (2nd Dept. 1979).

As a result of the language of subdivision 3, which refers to written, subscribed and acknowledged agreements, some courts, including the Appellate Divisions, Third and Fourth Departments, have held, essentially, that on-the-record oral stipulations of settlement are not enforceable. The Appellate Divisions, First and Second Department, have held to the contrary.

The first appellate decision in which oral stipulations were held not enforceable was Giambattista v. Giambattista, 89 A.D.2d 1057, 454 N.Y.S.2d 762 (4th Dept. 1982). In that case, a stipulation was placed on the record, testimony on divorce grounds was taken, and an agreement was reached that the judgment of divorce would not be signed until after the parties executed the property settlement. In fact, the court advised the parties that the agreement was not final until both parties had executed it before a notary and that, even then, the agreement was subject to the court’s review for unconscionability. After the transcript was typed up, the wife refused to sign it. The court ultimately entered the divorces anyway and incorporated the settlement into the decree. The Appellate Division held that the wife’s subsequently made motion to vacate the judgment should have been granted. The court ruled that since the record showed that the agreement was conditional, the mere fact that the agreement was recorded by the reporter did not make the agreement a final and binding settlement.

Had the court stopped there, the Giambattista case would be unexceptional. However, the court further stated, as an alternative ground for its ruling, that subdivision 3 allows the parties to “opt out” only by executed agreement. Not only that, said the Appellate Division, subdivision 5 (equitable distribution) requires that, absent a subdivision 3 agreement, the court must provide for equitable distribution and the parties cannot waive the necessity for the court to set forth its decision. While a formal trial could be avoided by a stipulation as to the evidence, in Giambattista there was no written agreement; no evidence in the record; and no findings by the trial court. On this theory, theGiambattista court also held the oral stipulation to be unenforceable and set aside the judgment based thereon. Thus, Giambattista suggested that even if the parties had actually intended the oral stipulation to be final, the fact that one party thereafter refused to execute the transcript meant that the stipulation was unenforceable. In a subsequent decision in Hanford v. Hanford, 91 A.D.2d 829, 458 N.Y.S.2d 418 (4th Dept. 1982), where there was no indication that the stipulation was intended to be only conditional, the court applied Giambattista and ruled the stipulation unenforceable in the light of one party’s subsequent refusal to formally execute a writing based upon the oral agreement.

The Giambattista and Hanford cases hold that two fundamental procedures must be followed in order to implement an “in court” settlement. First, the agreement must be reduced to writing and signed and acknowledged by the parties. Second, even if thus formalized, the court, before whom the divorce application comes, is required to affirmatively find that the agreement is not unconscionable at the time of final judgment. Thus, the court is not permitted simply to enter a judgment on the basis of uncontested testimony on the divorce grounds and the submitted agreement. Indeed, if the court is to make findings concerning the lack of unconscionability in the agreement, appropriate evidence of the financial circumstances will have to be placed in the record, either by formal proof or by stipulation.

The Giambattista ruling was followed and adopted by the Third Department in Lischynsky v. Lischynsky, 95 A.D.2d 111, 466 N.Y.S.2d 815 (1983). In that case, during trial, it was agreed that each party would go forward with his and her proof of divorce grounds and the property dispute would be resolved by an agreement placed on the record. Thereafter, the trial court granted dual divorces and incorporated the terms of the agreement into the judgment. The wife, on appeal, challenged the grant of a dual divorce and the husband, cross-appealing, challenged the incorporation of the agreement.

The majority of the Appellate Division, Third Department, following Giambattista, ruled it improper to incorporate the settlement terms where the agreement, though transcribed by the stenographer, had not been subscribed and acknowledged by the parties. However, the court found it proper to leave the dual divorce standing. Each party had agreed to submit his and her respective proofs, which the trial court found sufficient to grant each a divorce.

Two Justices dissented from the invalidation of the incorporation into the judgment of the agreement. They urged that stipulations of settlement are favored by the courts and are regarded as binding and enforceable. Refusal to sanction the on the record stipulation, they argued, creates the potential for delay and for mischievous interference with the settlement process. 466 N.Y.S.2d at 818.

The Second Department upheld the validity of open court stipulations of settlement in Harrington v. Harrington, 103 A.D.2d 356, 479 N.Y.S.2d 1000 (1984). There, open court stipulations were entered into and the terms of the agreements were incorporated into the divorce judgment. The husband did not oppose the settlement of the divorce judgment, did not submit a counterjudgment and did not appeal from the judgment. However, some months after the judgment had been entered, the husband moved to vacate the judgment based upon the Giambattista and Hanford decisions. The lower court vacated all provisions of the judgment, except those relating to the grant of matrimonial relief itself. All property issues were to be tried de novo before a special referee. The Appellate Division reversed the order of the lower court. First, it noted that, unlike Giambattista, the husband in Harrington had not appealed directly from the judgment. Also, unlike Giambattista, there was no agreement that the stipulation was not to be binding until reduced to writing and signed by both parties. Nonetheless, the Second Department determined to place its ruling on matters of policy, rather than these procedural distinctions. The court adopted the view of the dissenting opinion in Lischynsky that it was unwise to eradicate the simple, expeditious mechanism of a stipulation on the record to conclude the financial aspects of a matrimonial action. Further, a settlement stipulation, entered on the record in open court in the presence of the parties and counsel, has at least the same degree of formality as a written, subscribed and acknowledged separation agreement. The Harrington court concluded that the Legislature did not intend to abrogate CPLR 2104 with respect to matrimonial actions settled in open court.

The First Department joined the Second Department in holding that open court stipulations, spread on the record, are valid and enforceable under CPLR 2104 and not violative of Domestic Relations Law § 236, Part B, subd. 3. Sanders v. Copley, 151 A.D.2d 350, 543 N.Y.S.2d 67 (1st Dept. 1989). In Hargett v. Hargett, 256 A.D.2d 50, 680 N.Y.S.2d 526 (1st Dept. 1998), the court upheld an open-court stipulation of settlement which resolved a proceeding for equitable distribution following a foreign judgment of divorce. In line with its earlier position on the validity of open-court stipulations resolving matrimonial actions, the First Department held that open court stipulations were appropriate methods for resolving post-marital litigation over financial issues which survived the judgment of divorce.

As the result of all of this, the validity of open court stipulations settling matrimonial actions is subject to question until the Court of Appeals resolves the issue. It should be noted that the Appellate Division, Third Department, appears to believe that the Court of Appeals has resolved the issue in favor of the Third Department’s view of things. In Matisoff v. Dobi, 90 N.Y.2d 127, 659 N.Y.S.2d 209, 681 N.E.2d 376 (1997), the Court of Appeals ruled that a signed, but unacknowledged, marital agreement was unenforceable. In Harbour v. Harbour, 243 A.D.2d 947, 664 N.Y.S.2d 135 (3rd Dept. 1997), the Third Department read Matisoff as supporting its long-held view that oral stipulations of settlement made in open court are likewise unenforceable. The Second Department has held that nothing in Matisoff, which dealt with the invalidity of an unacknowledged agreement made out of court, caused it to change its position that stipulations of settlement, reflected in the court transcript, are valid. Nordgren v. Nordgren, 264 A.D.2d 828, 695 N.Y.S.2d 588 (2nd Dept. 1999); Natole v. Natole, 256 A.D.2d 558, 682 N.Y.S.2d 864 (2nd Dept. 1998). The First Department agrees with the Second Department and adheres it to view that such stipulations are valid. Rubenfeld v. Rubenfeld, 279 A.D.2d 153, 720 N.Y.S.2d 29 (1st Dept. 2001).

In those Departments (First and Second) which recognize the validity of oral stipulations of settlement placed upon the record in open court, where counsel for the parties stipulate on the record in open court to the terms of a settlement agreement, the settlement is binding upon the parties even if it is not executed by the party to be charged. Friedman v. Garey, 8 A.D.3d 129, 779 N.Y.S.2d 44 (1st Dept. 2004); Storette v. Storette, 11 A.D.3d 365, 784 N.Y.S.2d 34 (1st Dept. 2004). Thus, in these courts, an open court stipulation of settlement is enforceable and binding, notwithstanding the refusal of a party to execute a subsequent writing embodying the terms of the oral stipulation. However, it should be noted that counsel, in placing the stipulation on the record, could agree to make the oral agreement subject to a later writing, in which event, later execution and acknowledgment of the agreement by the parties to be charged would be required. An oral stipulation, like a written agreement, must be intended by the parties to be a recordation of their settlement, and not just a mere agreement to agree. Thus, a written stipulation not made in open court, executed by the attorneys for the parties was not effective where the stipulation was “subject to” the agreement of the parties, which was not forthcoming. Luisi v. Luisi, 244 A.D.2d 464, 664 N.Y.S.2d 346 (2nd Dept. 1997).

While the Fourth Department has rejected the use of in-court stipulations as a means for resolving equitable distribution matters, it has enforced open court stipulations settling custody disputes. Kelly v. Kelly, 19 A.D.3d 1104, 797 N.Y.S.2d 666 (4th Dept. 2005), appeal and reargument denied, 21 A.D.3d 1442, 801 N.Y.S.2d 555 (4th Dept. 2005) and appeal dismissed, 5 N.Y.3d 847, 805 N.Y.S.2d 547, 839 N.E.2d 901 (2005) and leave to appeal dismissed in part, denied in part, 6 N.Y.3d 803, 812 N.Y.S.2d 440, 845 N.E.2d 1270 (2006). The court reasoned that the requirement for a signed, acknowledged writing applies only to stipulations which effect equitable distribution.

In Leroy v. Leroy, 298 A.D.2d 923, 747 N.Y.S.2d 639 (4th Dept. 2002), the court rejected the father’s claim that the oral stipulation upon which the divorce judgment was based was not valid opting-out agreement under CSSA because he was not properly advised of what his child support obligation would be. The court held that the father entered into the stipulation knowingly and, in addition, had failed to raise this issue in the trial court when he sought downward modification of his child support obligation.

Where the parties have made an agreement in court, the court may decline to accept the agreement as the basis for the provisions of its matrimonial judgment. Where the provisions of the agreement are illegal, the court may not only decline to sign a judgment incorporating them, the court may, if the illegal provisions are sufficiently material, declare the entire agreement to be invalid. Uhl v. Uhl, 274 A.D.2d 915, 711 N.Y.S.2d 271 (3rd Dept. 2000). In Uhl, an open-court stipulation provided that the husband would cause the wife to be paid monies from a corporate payroll account, with income taxes and other items to be withheld from the wife’s check, as if she were an employee. The Appellate Division, affirming the lower court’s order invalidating the stipulation and directing that the parties proceed to trial, stated that it was clear that the stipulation contemplated unlawful conduct in requiring the wife to execute a tax form effectively certifying that she was an employee of plaintiff’s business. The husband was evidently seeking to have the wife cooperate with him in treating her payment for a distributive award as if it were employment income. It was also clear that the husband or his business were planning to deduct the payments to the wife from tax returns. Thus, the entire scheme, as set forth in the stipulation, attempted to obligate the wife to assist in either tax fraud or payroll padding.

To avoid uncertainties, counsel should, to assure that the stipulation will be upheld, attempt to reduce the terms of the stipulation to a writing, which will be signed and acknowledged by the parties. This requirement could be met by having a formal agreement prepared. The requirement could also be met by having the court stenographer prepare a transcript of proceedings which can then be signed and acknowledged by the parties. Given the increased number of statutory regulations and conditions which must be satisfied in order to have a valid agreement, and given the complications that may be presented by tax and pension considerations, taking the time and effort to put the agreement in writing may be the best course of all.

The practice has also developed of having the parties execute and acknowledge (before a notary), at the time that the stipulation is dictated in open court and on the record, a form in which the parties expressly acknowledge having heard and understood the stipulation and which stipulation is incorporated into the form by reference. Of course, if this form constitutes sufficient compliance with the statute, as interpreted in Giambattista and Lischynsky, all that has been accomplished is the creation of additional and formalistic paperwork. But, it should be noted, the use of such forms has been found to be sufficient to satisfy the requirements, as construed by the Third and Fourth Departments, for a signed and acknowledged writing. Vermilyea v. Vermilyea, 224 A.D.2d 759, 636 N.Y.S.2d 953 (3rd Dept. 1996); Ashcraft v. Ashcraft, 195 A.D.2d 963, 601 N.Y.S.2d 753 (4th Dept. 1993).

In Harbour v. Harbour, 243 A.D.2d 947, 664 N.Y.S.2d 135 (3rd Dept. 1997), the Third Department rejected an ingenious attempt by a trial court to enforce an oral stipulation of settlement. In Harbour, the additional opting-out agreement was not signed contemporaneously with the making of the oral stipulation. In an attempt to remedy this defect, the trial court directed both parties to execute an “opting-out” agreement nunc pro tunc. The trial court adopted this procedure in view of its exasperation with a party who unequivocally under oath represented to the court that she “opted-out” of the Equitable Distribution statute and that the stipulation, voluntarily entered into on the record, represented that agreement. However, the Third Department, adhering to its view that an oral stipulation of settlement is ineffective, held that the trial court lacked the authority, many months after the fact, to compel a party to validate an invalid agreement.

The Third Department has considered some other interesting questions raised in the wake of its Lischynsky holding. In one case, the Court ruled that Lischynsky was inapplicable to an oral stipulation in settlement of both an old law, Part A, case and an action subject to Part B, which had been consolidated for trial. Zioncheck v. Zioncheck, 99 A.D.2d 563, 470 N.Y.S.2d 950 (3rd Dept. 1984). In another case, during trial, it was stipulated that all pleadings but the complaint would be withdrawn, that each party could proceed against the other for a cruelty divorce without opposition, and property division and attorney fees provisions were included in the stipulation. The trial court granted only the plaintiff wife a divorce and defendant husband appealed. The appeal was dismissed by the Third Department which found that the withdrawal of pleadings created a consent to a default judgment, which defendant could attack, not by direct appeal, but by a motion to vacate the judgment. Tongue v. Tongue, 97 A.D.2d 638, 468 N.Y.S.2d 922 (3rd Dept. 1983). The Court of Appeals affirmed, but on different reasoning. The Court of Appeals noted that the stipulation included an agreement that the divorce claims of the parties would not be contested and each could take a mutual divorce against one another. As the trial court granted an absolute divorce, the Court of Appeals found the husband not to be aggrieved for appellate purposes. It held that he had “received precisely what he had requested and stipulated to”. 61 N.Y.2d 809, 473 N.Y.S.2d 950, 462 N.E.2d 127 (1984).

A similar result was adopted in Miller v. Miller, 98 A.D.2d 987, 470 N.Y.S.2d 228 (4th Dept. 1983). There, the parties placed an oral stipulation of settlement on the record and the wife testified to grounds for divorce. The court granted a judgment of divorce and directed incorporation of the agreement. Later, the wife refused to sign and acknowledge the agreement and moved to vacate it. While the lower court set aside the agreement and placed the property and maintenance issues for trial, the court declined to set aside the divorce. The Appellate Division dismissed the wife’s appeal from this determination, holding that she was not aggrieved by the judgment of divorce entered in her own favor. See alsoLeeds v. Leeds, 60 N.Y.2d 641, 467 N.Y.S.2d 568, 454 N.E.2d 1311 (1983).

A stipulation of settlement, made in open court and transcribed by the court reporter, remains a valid and enforceable contract, even if the action in which the stipulation was made is later abandoned. That is the holding of the court in Golub v. Golub, N.Y.L.J., May 28, 1991, p. 32, col. 6 (Sup.Ct. Kings County). In that case, the court was confronted with a situation in which the parties had placed a stipulation on the record, with the wife agreeing to submit the matter to the undefended calendar within 90 days. The husband proceeded to comply with the stipulation, but only in certain respects and not at all in others, and, perhaps in response to the husband’s defaults, the wife did not move the case along on the undefended calendar and it was ultimately abandoned. Well over three years later, the husband brought his own action and the court had to decide what effect, if any, to give the old stipulation. The court’s decision to validate the stipulation seems to be well grounded.

The stipulation was properly made under CPLR 2104 and, as made in Kings County, would be permissible under the Second Department’s holdings that such stipulations are valid and enforceable. That the stipulation was ultimately not incorporated into a judgment should have no bearing on the validity of the stipulation as a contract. Indeed, had the stipulation contained a provision which made the stipulation conditioned on a mandatory divorce, it might have run afoul of the statutory prohibition against contracts to alter or dissolve a marriage. (See General Obligations Law § 5-311). Breaches of the stipulation would not necessarily invalidate it, and, moreover, the court found that the husband had waived any claim based on the wife’s failure to move the first action on to the undefended calendar.

To be contrasted with Golub is McCormack v. McCormack, 174 A.D.2d 612, 571 N.Y.S.2d 498 (2nd Dept. 1991), where the parties entered into a stipulation of settlement before a Judicial Hearing Officer who found the stipulation voluntary and granted a divorce. Shortly thereafter, the husband died and the wife moved to set aside the divorce and stipulation. The only difficulty, and it was no small one, was that the parties had never consented to have their case heard and determined by a Judicial Hearing Officer in the first place. Thus, the Judicial Hearing Officer was without authority to pass upon whether the stipulation was voluntary and was without authority to grant a divorce. Since the entire proceeding before the Judicial Hearing Officer was unauthorized, the stipulation and divorce were set aside.
 
C236B:19: Disclosure by Net Worth Statement

As part of the reforms made in the Equitable Distribution Law, in 1980, the Legislature took the provisions of DRL § 250, entitled compulsory financial disclosure, and transferred them to DRL § 236, Parts A and B (subdivision 4 to Part B, subdivision 2 to Part A). The reason for repeating substantively identical legislation in two Parts of the same statute is the anticipation that the courts would hold that discovery under Equitable Distribution (Part B) would be broader than discovery under the old law (Part A) pertaining to alimony and child support, as has proven to be the case.

Two types of discovery are authorized by the statute: a statement of net worth and compulsory disclosure by resort to the disclosure devices authorized in Article 31 of the CPLR.

A net worth statement consists of a listing, under oath, of a spouse’s total assets and income, with breakdowns for type and amount, and of the spouse’s total liabilities and fixed financial obligations, again broken down by type and amount. The statement must show the amount by which the spouse’s total assets exceed total liabilities or the amount by which liabilities exceed assets. It is this comparison of assets against liabilities that constitutes “net worth”. The form of net worth statement is provided by court rule; with one exception, discussed below, substantial compliance with the requirements of the court rules is required. 22 N.Y.C.R.R. § 202.16 (subd.b).

All income and assets “of whatever kind and nature and wherever situated” must be disclosed. In addition, all assets transferred in any manner during the three preceding years, or the length of the marriage, whichever is the shorter, must be listed, unless the transfer was in the routine course of business and an asset of equivalent value to the transferred asset was received. However, the received asset must be identified in the net worth statement. While the term “preceding three years” has not been further defined in the statute, it is generally taken to mean the three years immediately preceding the commencement of the action.

Net worth statements must be accompanied with certain critical documentation.

A current and representative paycheck stub must be provided. The purpose of this requirement is to provide a ready check on the accuracy of the representations made in the net worth statement as to current income. By current paycheck stub, the statute is referencing the most recent one received prior to the completion of the net worth statement. But, if for some reason, the most current paycheck stub is not representative, then an earlier--but representative--stub must be provided, in addition to the current, but non-representative one. A paycheck stub may not be representative, for example, because it reflects one-time deductions which are not routine or, conversely, it does not reflect regular deductions. Alternatively, a paycheck stub may not be representative because the pay shown on it is unusually high or low. For example, a worker who is paid by the hour may have missed a lot of work due to illness; conversely, another worker may have an unusual amount of overtime.

A narrow reading of the statute would justify the submission of a current but non-representative paycheck without the concurrent submission of a recent but representative paycheck. However, if only the current one is submitted, the disclosing party will not be in compliance with the statute. And, if only the representative one is submitted, the disclosing party may be faulted for not providing the most current stub. In any event, when all stubs are produced in disclosure, the discrepancy will be highlighted. The disclosing party should proceed in good faith and identify which stubs are being submitted and why. It would be appropriate, and helpful to a reviewing court, to provide annotation in the appropriate place on the net worth statement as to the reasons why the current paycheck stub is not representative.

The disclosing party must also supply his or her most recently filed state and federal income tax returns and copies of the W-2 wage statements submitted with the federal returns. The situation is commonly met where a party has not yet filed a return for a year in which he or she has received a W-2 form. While not strictly required by the statute, good faith requires that the party provide the most current W-2 forms, as well as the most recent tax return and its W-2 forms.

With the net worth statement, the parties are required to supply information relating to group health insurance plans and other medical benefits which would be available for any minor children who the parties are obligated to support. The information called for includes: (i) the name and last known mailing address of the parties and each dependent; (ii) the identification and description of each group health plan; (iii) a detailed description of the coverage available; (iv) the identification of the plan administrator for each plan and each administrator’s address; and (v) the identification numbers of each group plan. The court may require that additional information be provided. Rather than write or type out a description of the plan and its coverage, it would be appropriate to annex a copy of the plan documents to the net worth statement.

By court rule, each party is required to submit a copy of his or her signed retainer agreement with counsel with the net worth statement. 22 N.Y.C.R.R. § 202.16 (subd. c). The purpose of this requirement is to enable the court to verify that the retainer agreement is in compliance with the attorney conduct and disciplinary rules adopted by the Appellate Divisions. Where counsel enters the case after the net worth statement has already been file, the retainer agreement is to be filed within 10 days of its execution. Id.

Under the statute, each party may demand that the other provide a net worth statement simply by serving a written notice. The statement is to be provided within 20 days after receipt of the demand. Since the time for response is keyed to receipt, rather than to service, to avoid disputes over when the demand was received, it is good practice to obtain written acknowledgment of receipt. This can be done by serving the demand by hand and obtaining a “copy received” or by serving the demand by mail, return receipt requested.

The demand procedure is optional. However, the statute requires that, if demand is not made, each party must file his or her statement with the court in which the case is pending within 10 days after joinder of issue. Issue is “joined” both when the defendant answers the complaint and when the plaintiff replies to a counterclaim. The statute would seem to require that both parties file their net worth statements within 10 days after service of defendant’s answer if no counterclaims are interposed or within 10 days of service of plaintiff’s reply if defendant has counterclaimed. While the statute speaks only of “filing”, a copy should be served on the other side and many clerks will not accept papers for filing unless proof of service is provided.

The statutory requirement that the net worth statement be filed within 10 days of joinder of issue, if not demanded, is commonly overlooked. Indeed, it is not uncommon for demands for net worth statements to be made more than 10 days after joinder of issue. But the statutory requirements sit along side requirements imposed by court rules governing the calendaring of matrimonial actions. The court rules are found in the Uniform Rules for the Supreme and County Courts. Under those rules, both parties must provide the court and the opposing counsel with a copy of the net worth statement at the time of the preliminary conference. 22 N.Y.C.R.R. § 202.16 (subd. f). These conferences are required to be held within 45 days of the assignment of the case to a judge 22 N.Y.C.R.R. § 202.16 (subd. f), which assignment must generally be requested not later than 45 days from the date of service of process upon the defendant. 22 N.Y.C.R.R. § 202.16 (subd. e).

The court rules do not extend the time to submit a net worth statement where a demand was served and the time to respond to the demand would expire prior to the preliminary conference.

The provisions of the court rules apply to all Supreme Court actions and proceedings in which net worth statements are required by Part B of Section 236, as well as in all other Supreme Court matters in which a judicial determination may be made with respect to alimony, maintenance, support or equitable distribution. The rules also apply to cases involving those issues which are referred to Family Court. 22 N.Y.C.R.R. § 202.16 (subd. a).

The court rules provide for a standard official form net worth statement. All sworn net worth statements required under section 236 (both Part A and Part B) must be in substantial compliance with the standard form. Id., § 202.16 (subd. b). As discussed below, there is one situation where more exacting compliance is apparently required.

The court rules call for the disclosure of more financial detail and information than specifically mentioned in the statute itself. For example, with respect to wide categories of property, information must be disclosed as to the location of the property, the title owner, the date of acquisition, the original cost, the source of the funds used to make the purchase, the estimated fair market value, the amount of any liens and the current equity. The function of this aspect of the court rules is to fill in a gap in Section 236. While the discovery sections in Part A and Part B each provide for the service and filing of sworn statements of net worth, the statute does not specifically delineate the detail that must be supplied in such statements. The court rules provide for a standard form of net worth statement.

As noted above, net worth statements need not be in exact compliance with the form set forth in the Rules; substantial compliance will do. 22 N.Y.C.R.R. § 202.16(b). There is, however, one exception. The exception concerns net worth statements submitted in support of a motion for temporary, or pendente lite, relief. The rules direct that, unless excused by the court for good cause, no motion for temporary maintenance, child support or counsel fees may be heard unless the moving papers include a statement of net worth in the official form. 22 N.Y.C.R.R. § 202.16(k). Since the allowance for substantial compliance excepts out net worth statement used on temporary or pendente lite motions, it would seem that the statements used on such motions must be in exact or literal compliance. This should be more of an academic than practical issue since, if the net worth statement used on a pendente lite motion is in substantial compliance with the Rules, the court should not ordinarily, or lightly, deny the motion because of a technical defect in the form used.

The party opposing a pendente lite motion is required to submit his or her own net worth statement, in the form prescribed, on pain of being deemed to have admitted any facts asserted by the moving party. The opposing party is allowed to controvert facts by the submission of other sworn statements or affidavits, but only with respect to facts which is not feasible to controvert in the opposing party’s statement of net worth. As with the moving party, the opposing party’s net worth statement is to be in exact compliance with the Rules form, but, again, if the form is in substantial compliance, the court should not ordinarily or lightly treat the opposing net worth statement as a nullity.

To insist upon literal compliance in all respects would would exalt form over substance and, in the end, make more work for the court and the parties since the movant could refile the motion, if the motion is denied on account of a technical defect in the net worth form, or the opposing party could see to reargue, renew or modify or appeal thependente lite order, if the form, though in substantial compliance, was deemed a nullity by the court and not considered on the motion.

Note should also be taken of Kim v. Kim, 170 Misc.2d 968, 652 N.Y.S.2d 694 (Sup.Ct. Suffolk County, 1996), which held that a party may be punished for contempt of court if he or she makes fraudulent and deceitful statements in a net worth statement. In that case, the court imposed a $10,000 fine on husband for failing to disclose in his net worth statement the substantial payments that he was making to his alleged paramour, the monies he had given to relatives, and for substantially overstating certain expenses, which nondisclosures may have impacted adversely to the wife on motion for pendente lite support.

Net worth statements are central to the matrimonial discovery process. Not only should parties be under a legal obligation to be as accurate as possible in preparing their net worth statements, it is important that parties be aware that serious penalties will be imposed upon those who make material misrepresentations in such statements. Net worth statements are widely relied upon by courts and by adversary parties and material misrepresentation merits swift and effective punishment, not only as a sanction against the individual wrongdoer but as a deterrent to those otherwise inclined to follow down the same path.
 
C236B:20: Disclosure Generally

Subdivision 4 of Part B of DRL § 236 contains a compulsory financial disclosure provision. The courts have long held that, under the Equitable Distribution Law, the entire financial history of the marriage must be open for inspection by both parties during discovery. Current financial status or ability to pay is no longer all that counts. Roussos v. Roussos, 106 Misc.2d 583, 434 N.Y.S.2d 600 (Sup.Ct. Queens County 1980). Both parties are entitled to a searching exploration to discover the extent of “marital property”, the extent of “separate property”, to uncover hidden assets and possible waste and generally to discovery of information which may bear on the financial issues to be determined. Id., 434 N.Y.S.2d at 602.

In Roussos, the court held that entitlement to broad discovery exists even in the absence of a specific reference to equitable distribution in Part B, subdivision 4 and the possibility that discovery might not be available in aid of equitable distribution if maintenance or child support was not in issue. 434 N.Y.S.2d at 603.

It is submitted that the absence of an express reference to equitable distribution should not bar discovery where maintenance support is not requested. Such discovery should be available under CPLR 3101(a). Evidence of facts pertinent to equitable distribution should be deemed “material and necessary” and discovery thus permitted. The issue should be rare since support is often claimed though it is suspected that it may not ultimately be awarded.

In Roussos, the court held that discovery would not be limited to the past three years and could extend to the entire financial history of the marriage. The wife was also held entitled to disclosure of all of the husband’s assets, regardless if jointly held with third persons or as a corporate shareholder or employee. Such discovery was permitted to be obtained by use of a deposition notice which contained a demand for documents for use at the deposition under CPLR 3111.

Of great significance is the recognition by the Roussos court that if the court is to consider all the factors set forth on various aspects by the Legislature in an orderly fashion at trial, much depends upon full preparation and full use of applicable disclosure devices. See 434 N.Y.S.2d at 602.

Recognizing that disclosure in Part B cases may be complex and time-consuming, some courts have expressed approval of the practice of proceeding to obtain at least preliminary discovery by use of detailed interrogatories. It has been said that the use of interrogatories will enable the answering party to retrieve relevant documents and furnish proper answers, and may serve to narrow the scope and compress the length of a deposition, if not obviate the need for it entirely. Bofinger v. Bofinger, New York Law Journal, July 14, 1981, p. 15, col. 3 (Sup.Ct. Suffolk County); see alsoMyers v. Myers, 108 Misc.2d 553, 437 N.Y.S.2d 894 (Sup.Ct. Nassau County 1981).

In one case, a husband refused to supply information demanded in interrogatories on the ground that the disclosure sought concerned property which he contended was separate property. The court rejected this contention and ordered that the detailed interrogatories be answered by detailed responses. The court held that whether or not the property at issue was, in fact, separate, is a matter for the court to decide at trial after hearing all the proof. Disclosure, it said, should be obtainable so that the determination as to whether the property is subject to distribution and what its value is can be based upon a credible record. The wife had the right to obtain discovery of these assets and to trace their disposition and the husband could not avoid that since that was something the court would ultimately determine. The court also held, following theRoussos case, that, even though the case did not involve an issue of support, the wife was entitled to discovery on the distinct issue of equitable distribution. Aron v. Aron, N.Y.L.J., September 3, 1982, p. 7, col. 2 (Sup.Ct. N.Y. County). If the wife had requested support, discovery of separate property (even if the property was separate) would still be proper since it would be taken into account in determining whether maintenance should be awarded.

CPLR 3130 permits a party to a matrimonial action to serve written interrogatories and also demand a bill of particulars. Thus, a party may demand a bill of particulars to obtain amplification of the opposing party’s pleading without sacrificing the opportunity to serve written interrogatories to obtain detailed financial data.

CPLR 3130 also provides that, after the commencement of a matrimonial action or proceeding, the court may direct a non-party to answer written interrogatories limited to financial information concerning a party. The application must be made on notice to both the other party and the non-party from whom disclosure is sought, with the quantum of notice to be fixed by the court. This means that the application is to be brought on by order to show cause. The statute requires that the interrogatories may be allowed if both reasonable and necessary to the prosecution or defense of the matrimonial action.

The statute is designed to expressly permit a matrimonial party to obtain discovery from a non-party by interrogatories rather than by oral or written deposition or demand for discovery and inspection. The courts have been careful in regulating discovery from non-parties in matrimonial actions. The statute reflects this concern by requiring that the interrogatories be reasonable and necessary. The requirement of reasonableness would seem to preclude a party from seeking to compel a non-party to bear the burden of answering a massive number of boiler-plate interrogatories. The requirement that the interrogatories be necessary suggests both that the information sought is material and that efforts to obtain the same information by other means (such as from the party whose finances are in question) were unsuccessful.

Interrogatories can be the source of discovery abuse and it would appear that the court should require the movant to clearly demonstrate that there is a legitimate and proper purpose to be served in requiring a non-party to answer specific requests.

Snow v. Snow, 209 A.D.2d 399, 618 N.Y.S.2d 442 (2nd Dept. 1994), cautions against the use of that favorite short-cut for those who want to evade providing complete interrogatory answers: “N/a”.Snow confirms that “N/a” translates to “not applicable”, which the court rules, should not be used as the equivalent of “No”.

Interrogatories can be the source of discovery abuse and it would appear that the court should require the movant to clearly demonstrate that there is a legitimate and proper purpose to be served in requiring a non-party to answer specific requests.

Because interrogatories are demanded at an early stage of the case, when parties may not yet have located and organized their records, it is often difficult to compile answers to voluminous interrogatories within the 20 day period allowed by CPLR 3133. Perhaps in recognition of these practical difficulties, the court in Beauregard v. Millwood-Beauregard, 207 A.D.2d 633, 615 N.Y.S.2d 938 (3rd Dept. 1994) held that dismissal of the case was too harsh a penalty for a 30 day delay in responding to interrogatories.

In Wilber v. Wilber, 57 A.D.2d 1023, 395 N.Y.S.2d 392 (3rd Dept. 1977), the court confirmed the view articulated in Roussos, that all of the CPLR Article 31 devices are available in a matrimonial action to obtain financial information. The court found that the husband’s claim that discovery was sought to harass him to be unsupported. Nor did the court find merit in the suggestion that because the wife had been the bookkeeper for the husband’s business discovery of documents was unnecessary. Her experience, the court said, may enable her to have better comprehension of the husband’s circumstances but was not a substitute for the records themselves.

The court may grant a protective order changing the place and method of the deposition. Thus, in one case, Rogovin v. Rogovin, 3 A.D.3d 352, 770 N.Y.S.2d 342 (App.Div. 1st Dept. 2004), where the defendant resided in Kansas and was the sole caregiver for her ailing nonagenarian grandmother who suffered from dementia and required around-the-clock care, the court ordered that defendant should be deposed by means of live video conferencing, rather than requiring her to travel to New York. Ordinarily, the deposition of a nonresident defendant is taken in the county where the action is pending under CPLR 3110.

The court may restrict the dissemination of a transcript of a deposition, or of an audio-or videotape of a deposition, where necessary to prevent unreasonable harassment, embarrassment, or other prejudice, but the burden is on the party seeking such restriction to establish a proper basis for granting such relief. SeeParker v. Parker, 2 Misc. 3d 484, 773 N.Y.S.2d 518, 124 A.L.R.5th 791 (Sup.Ct. Nassau County 2003).

CPLR 3122 has been amended to comply with the federal Health Insurance Portability and Accountability Act, popularly known as HIPAA. Under the revised CPLR 3122, a medical provider served with a subpoena for a patient’s medical records need not respond or object to the subpoena if the subpoena is not accompanied by a written authorization by the patient.

Where the nonparty witness resides in a foreign jurisdiction, the court may issue a letter rogatory, which requests the foreign court to make available its processes to take the witness’ deposition under its laws, or a commission, which is a direction to a commissioner appointed under New York law to take testimony. CPLR 3108. An open commission proceeds by oral questions, and a sealed commission utilizes written questions. An oral interrogation is a more effective method to procure information and provides an opportunity for cross-examination of a witness who may not appear at trial. See Boatswain v. Boatswain, 3 Misc. 3d 803, 778 N.Y.S.2d 850 (Sup.Ct. Kings County 2004). In that case, the court issued an open commission to obtain the deposition of a nonparty witness, residing in Toronto, Canada, who the plaintiff claimed consented to the tape recording of telephone conversations during which the defendant made admissions on issues relating to custody and domestic violence. The court directed that the deposition be videotaped so that the court, at trial, could observe the demeanor of the witness. The plaintiff was also directed to pay the travel expenses of the defendant and her counsel to Toronto for the deposition. While the court suggested that the foreign deposition could be avoided if the nonparty witness promised to voluntarily appear at trial, reliance upon such a promise could be fraught with risk. The party seeking the testimony might be hard pressed to obtain an adjournment of the trial to secure the foreign deposition in the event the witness did not appear as promised.

Disclosure should generally be available in contested post-judgment litigation. Sinosky v. Sinosky, 26 A.D.3d 874, 809 N.Y.S.2d 743 (4th Dept. 2006) (court should have granted former husband’s application for deposition of former wife in connection with his application to terminate maintenance; the former husband demonstrated that a deposition of the former wife would have likely assisted him in proving his case).

In Etzion v. Etzion, 7 Misc. 3d 940, 796 N.Y.S.2d 844 (Sup.Ct. Nassau County 2005), the court ordered that the husband allow the wife’s computer expert to clone or copy the contents of the hard drives of all computers used by the husband on which the business records of his companies were contained. However, any personal records, emails or other correspondence between the husband and third parties or the husband and his counsel were not to be copied or produced. The cloning and copying was ordered to be supervised by a Referee, whose fees were to be shared. Since the wife had substantial assets to pay her own counsel fees, each party was required to pay their own counsel and their own computer expert, subject to possible reallocation at trial.

Of late there have been situations where the monied spouse has retained a vocational expert to opine as to the future employment prospects of the less-monied spouse. While, generally, a party who places his or her economic or health condition in issue may be required to submit to an interview or examination by an expert, there are circumstances in which such examinations have been denied. In Obermueller v. Obermueller, 24 A.D.3d 641, 808 N.Y.S.2d 324 (2nd Dept. 2005), it was held proper for the court to issue protective order against husband’s notice for wife to submit to vocational assessment. The wife was 60 years old and had never worked outside the home during a 28 year marriage. As the husband was simultaneously seeking discovery through other devices and that discovery had not yet been completed, a protective order against his demand for her to submit to a vocational assessment was properly granted to prevent unreasonable annoyance and expense.

The Second Department has sustained an order which required a husband to produce records of a corporation in which he had a 50% interest. In so holding, the court stated that, in a matter subject to equitable distribution, the parties must be granted a “searching exploration of each others‘ assets and financial dealings.” Rubin v. Rubin, 87 A.D.2d 587, 447 N.Y.S.2d 762 (2nd Dept. 1982). Under Part A, the court had held that discovery could not be obtained directly from a corporation in which the other spouse had a minority interest, except as necessary to disclose the extent of payments actually made to that spouse. Ingarra v. Ingarra, 75 A.D.2d 576, 426 N.Y.S.2d 583 (2nd Dept. 1980). In Rubin, the court distinguished Ingarra on the ground that in Rubin the husband owned a 50% interest. It is suggested, however, that as long as a spouse has any significant interest in a corporation (even much less than 50%), discovery of corporate records should be allowed as necessary to an evaluation of the asset. An exception might be made where the corporation’s stock is publicly traded, since there the market place will be an objective indicator of the stock’s value.

The Second Department in Fox v. Fox, 96 A.D.2d 571, 465 N.Y.S.2d 260 (2nd Dept. 1983) elaborated further on the subject. In Fox, the wife obtained an order directing the husband to produce all corporate records of a certain corporation. The husband appealed, arguing that he was only a corporate officer and his parents owned all the stock. The wife countered with the contention that the husband was really running the business as a sole proprietorship and his parents played no active role.

The Appellate Division modified the order, limiting the corporate records to be produced to profit and loss statements, balance sheets, agreements to which the husband was a party, account records with respect to the husband, and records of credit card purchases and association contributions made on behalf of defendant by the corporation. The court denied the wholesale production of the corporate bank accounts and refused to compel the husband to be deposed in his capacity as a corporate official.

The court recognized that broad financial disclosure was necessary in equitable distribution matters and that the full array of CPLR devices may be resorted to. The court also found that the problems inherent in obtaining disclosure concerning a business in which the husband and his parents were principals and the husband’s own lack of cooperation warranted at least some disclosure of the corporate records. However, the order made by the lower court was exceptionally broad, permissible perhaps only if the title spouse was the principal stockholder. Since the husband was not a stockholder at all, the disclosure permitted by the lower court was too broad. Accord, Avery v. Avery, 89 A.D.2d 633, 453 N.Y.S.2d 91 (3rd Dept. 1982).

A similar approach was taken, prior to Fox in Cherno v. Cherno, 118 Misc.2d 950, 461 N.Y.S.2d 975 (Sup.Ct. Nassau County 1983). InCherno, the husband had a less than 2% interest in a New York City law firm and, relying on Ingarra, contended that he need not produce partnership tax returns and agreements. The court, citing this work, concluded that, while the interest was a minority one, the requested records should be produced. However, the court allowed the husband to redact material pertaining to his partners so that their confidences could be preserved. The court also directed the husband to produce partnership financial statements, balance sheets, and operating statements.

A more recent case in which a more liberal approach was taken is Reich v. Reich, 36 A.D.3d 506, 830 N.Y.S.2d 29 (1st Dept. 2007) where broad and searching disclosure was held appropriate as to characterization and valuation of a closely held corporation in which a spouse was a 2.5% shareholder.

Note that, in Fox, the Appellate Division observed that a deposition notice which sought the production of documents at the deposition need not provide the same specificity as is required of a notice for discovery and inspection under CPLR 3120.

The Second Department has made it manifest that where a spouse is the sole shareholder of a corporation, the other spouse is not to be “restricted” in examination into the corporate interest. Ruggiero v. Ruggiero, 100 A.D.2d 875, 474 N.Y.S.2d 133 (2nd Dept. 1984). The broad nature of the allowable discovery is shown in Maratea v. Maratea, 103 A.D.2d 799, 478 N.Y.S.2d 331 (2nd Dept. 1984), holding it was proper to allow the wife disclosure of the telephone bills of her husband’s businesses. In that case, the wife argued that these businesses were paying her husband’s telephone expenses, thus increasing his income.

The importance of complete financial discovery into corporate or business records, and the related problem of scope of disclosure as to minority business interests, were the subject of a major opinion in Kaye v. Kaye, 102 A.D.2d 682, 478 N.Y.S.2d 324, (2nd Dept. 1984). In Kaye, the husband had minority interests in three of four closely-held family corporations, with the husband’s father and brother holding the other stock in the three and with the husband’s father owning all of the fourth. The opinion stressed that a meaningful valuation of the husband’s business interests required a fairly extensive audit of the corporate affairs, a task not diminished by the holding of a minority position. Thus, the court, as to the three corporations in which the husband had minority interests, allowed interrogatories addressed to identity of corporate bank accounts, agreements between the husband and the business and/or the other stockholders, corporate balance sheets and tax returns. As to the corporation owned wholly by the husband’s father, the court applied Fox and allowed discovery only of agreements between the husband, the corporation, and the shareholders.

The court allowed the discovery to proceed by interrogatories, holding that this is an available device and its use may expedite the process of discovery in complex cases. Moreover, the court, noting that CPLR 3130 authorizes discovery by interrogatories of nonparties in matrimonial litigation, suggested that if the husband could not supply the information, the wife could seek leave to serve interrogatories directly upon the corporations.

The Kaye court found that it was unwarranted to limit the wife’s discovery to the three year period, measured backward from the commencement of the action. The court found the wife’s request for five years’ worth of documents not unreasonable.

Though Kaye allowed broader disclosure, that disclosure is not unlimited. For example, while the wife was entitled to accurate summaries of the husband’s personal expenses for the last five years and access to the records so she could verify the summaries, it was unduly burdensome to require the husband to provide detailed calculations as to each individual purchase and transaction.

Though discovery in matrimonial actions has become lengthy, detailed and costly, the broad discovery allowed in Kaye is essential to the effective and just application of equitable distribution. Where the parties have interests in publicly traded stocks, the value can be checked by stock quotations. With closely held corporations, there is no readily identifiable market value and valuation problems are complex. Most certainly, the parties will be required to offer expert opinion on the question. While various factors have been identified as significant in reaching a proper valuation, those factors can be weighed without access to the financial records of the corporation. Thus, without the documents, the non-titled party would be at a severe, if not fatal, disadvantage at trial.

Nevertheless, note should be taken of Goldsmith v. Goldsmith, 184 A.D.2d 619, 584 N.Y.S.2d 902 (2nd Dept. 1992). There, the Appellate Division upheld the trial court’s limitations on the wife’s efforts to obtain discovery concerning business interests in which the husband was minority owner. While the Goldsmith decision does not spell out the precise nature of the limitations imposed, it cites to the earlier Fox, rather than rely on the later Kaye decision on this point.

Prior to the Kaye case, the Third Department held that, where minority stock interests are involved, the limitations set down in Fox should be followed. Rosenstock v. Rosenstock, 101 A.D.2d 904, 475 N.Y.S.2d 600 (3rd Dept. 1984).

Mention was made above of the Avery case in the Third Department where the court limited disclosure from a husband who, as in Fox was not a stockholder in a corporation owned by his family but who was president and a salaried employee. Following that decision, additional disputes arose, and on a second appeal, the Third Department allowed discovery of corporate records from the date of the marriage, reflecting payments by the corporation to the husband (by salary, loans, gifts or otherwise) and concerning any trusts of which the husband was the beneficiary and other records disclosing corporate benefits to the husband. Avery v. Avery, 101 A.D.2d 900, 475 N.Y.S.2d 167 (3rd Dept. 1984).

Discovery may be limited based upon the character of the property interest. Thus, where the property is separate property, some courts have narrowed the scope of disclosure. SeeSaljoughy v. Saljoughy, 97 A.D.2d 935, 470 N.Y.S.2d 731 (3rd Dept. 1983) (discovery limited only to assets acquired during marriage). Thus, in Van Ess v. Van Ess, 100 A.D.2d 848, 474 N.Y.S.2d 90 (2nd Dept. 1984), involving a professional practice started before the marriage, the court limited disclosure to that needed to determine the professional’s current income and the appreciation in value, if any, in the practice during the relevant period.

Though this limitation has a surface appeal, it overlooks the possibility that the full value of separate property is a factor in the equitable distribution of marital property and in maintenance and child support determinations. Moreover, the precise character of property may be difficult to establish at the pre-trial stage, with the court to determine whether property is marital or separate at trial. And, to the extent that the property appreciated during marriage, the otherwise separation property may have a marital component. It seems unfair to curtail discovery directed at what might potentially be separate or exempt property at the pre-trial stage where the property might, in fact, be marital or, even if not, its valuation may be important on other issues.

The Van Ess case should also be noted for its holding that the wife was not entitled to disclosure of the identities of the husband’s medical patients. With the court remarking that the marriage was of “limited” duration and the wife failed to make a “clear showing” of the need for this data, there may be room in different circumstances to argue for such disclosure.

One means by which the courts have also regulated disclosure is by a time limitation. In Pomeranz v. Pomeranz, 99 A.D.2d 407, 470 N.Y.S.2d 11 (1st Dept. 1984), the court, sustaining the lower court, held appropriate to limit discovery to the six year period prior to the commencement of the action. However, the court allowed the discovering party leave, after completion of the other party’s deposition, to obtain further disclosure of identifiable documents. Since the marriage was of 35 years’ duration, it was too onerous to sweep all 35 years in discovery on the record presented. A dissent argued that the discovering party, the wife, was prejudiced because her husband had the advantage of knowing what happened earlier and puts her to the expense of more motions should she seek to obtain more knowledge. For a case to like effect as Pomeranz, see Kaye, supra (5 year period imposed). More recent cases have tended not to impose a temporal limitation on discovery. For example, in Goldsmith v. Goldsmith, 184 A.D.2d 619, 584 N.Y.S.2d 902 (2nd Dept. 1992), the Appellate Division set aside the trial court’s limitation that discovery only go back five years prior to the commencement of the action. The Appellate Division held that, unless the request is unreasonable, the entire financial history of the marriage is open for examination by either party. This approach seems to be the better rule, is in line with the judicial recognition that broad disclosure is necessary for effective and fair equitable distribution, and avoids the imposition of, and adherence to, arbitrary rules.

As the Pomeranz dissent argued, where the asset in question is marital, not allowing the discovering party to obtain records going back to the inception of the marriage places the parties on an unequal footing. In the Avery case, supra, where the corporation predated the marriage, discovery dating back to the date of the marriage (but not further) was held proper. While it might be unduly burdensome to allow discovery on matters happening decades ago with the same detail as more current matters, there would seem to be little reason why at least some disclosure of the more historical matters should not be allowed. For example, if one party has all the tax returns, there would seem to be little reason why all should not be disclosed. Indeed, discovery of earlier matters might be especially important where separate property is concerned since the nonowner spouse would have to attempt to show appreciation in value. To do that, knowledge of the value at the time of the marriage seems indispensable.

The privilege against self-incrimination is sometimes asserted in response to discovery requests. Where a party has reasonable cause to apprehend danger of incrimination by giving a direct answer, the party is entitled to invoke the privilege. The court may not direct a party to answer questions as to which the privilege against self-incrimination is justified. Nor can the court impose a discovery sanction where a refusal to answer questions is based on the privilege. Serdaroglu v. Serdaroglu, 209 A.D.2d 604, 622 N.Y.S.2d 50 (2nd Dept. 1994). However, the court can draw an unfavorable inference from the invocation of the privilege. Marine Midland Bank v. John E. Russo Produce Co., Inc., 50 N.Y.2d 31, 427 N.Y.S.2d 961, 405 N.E.2d 205 (1980). In Frank v. Frank, NYLJ, May 11, 1984, p. 17, col. 1 (Sup.Ct. Nassau County), the principles authorizing disclosure of personal and corporate records met with the principles governing the invocation of the Fifth Amendment privilege against self-incrimination. In that case, the husband refused to testify and produce documents as to his personal finances and as to corporate finances on Fifth Amendment grounds. As to the corporate records, the court found the privilege improperly invoked, citing a line of cases to the effect that an individual cannot rely on the privilege as to the contents or testimonial aspects of corporate records in his possession. As to his own personal finances, the court noted that an inference can be drawn in a civil case from the invocation of the Fifth Amendment. Yet, doing so was not likely to help the wife since there would still be little evidence of the husband’s true income. Likewise, the court noted that a mere declaration that there is a possibility of self-incrimination is not conclusive; there needs to be a real danger of that result. While the husband averred that he had made a payment agreement with the Internal Revenue Service, the court inferred that there was agreement which might bar a prosecution. To resolve the issue, it ordered an in camera hearing to determine whether the privilege was properly invoked.

In C. v. C., 153 Misc.2d 660, 582 N.Y.S.2d 926 (Sup.Ct. Suffolk County 1992), the court grappled with the question of disclosure of the name of the patients of a professional spouse. In that case, the husband was a psychologist and he admitted that when patients paid him in cash, he would erase their names from his appointment book and not report the cash as income. The husband claimed that the unreported cash amounted to $2,000 to $3,000 per year. The wife, in order to ascertain the extent of the unreported cash income, sought disclosure of the names of the patients who paid in cash, as well as production of the original appointment book.

The court concluded that, at least in this instance, the rights of the patients to privacy should prevail over the wife’s need to verify the amount of the unreported cash income. The court noted that the wife had other means for trying to establish the amount of unreported cash income, including reliance upon the husband’s admissions, testimony from the wife, and testimony from other witnesses. The difficulty, of course, is that the professional spouse may admit to less income than was really the case. If the spouse disagrees with the limited admission, the dispute becomes her word against his, with the professional spouse having sole access to records which may shed light on the truth.

In C., the court expressed some exasperation with the parties for each failing to suggest any alternative or compromise solution to the discovery dispute: the husband wanted to deny all access; the wife wanted full access. One possible compromise solution is to require the production of redacted records in which the actual names of patients are replaced with numerical or alphabetical substitutes.

An alternative means of protecting the legitimate interests of the nonprofessional spouse is for expert testimony to be obtained, if possible, as to the extent of unreported cash typically involved in practices of similar size and specialty. The “underground” cash economy is, unfortunately, not confined to a few isolated people but is wide-spread. Experts may be able to estimate the extent of the cash involved in a particular practice based on findings made in cases involving similar practices. Under the circumstances, requiring the professional spouse to foot the bill for obtaining such expert testimony would appear appropriate. On the other hand, as against the possibility that the expert testimony may be inflated, the professional spouse should not be precluded from obtaining expert testimony of his or her own.

Of significance, C. makes plain that patients or clients of a professional spouse do not lose their right to privacy simply because they seek the services of a professional who is involved in his or her own divorce proceeding. Patients or clients have the right to have their physicians or attorneys preserve patient and client confidences. One of the dangers presented in C. was the wife’s acknowledgement that, once she obtained patient names, she intended to serve third party interrogatories on them. Not only would that practice drag patients into their psychologist’s divorce, it multiplies the risk that the very fact that patients were receiving psychological assistance would be disclosed.

A frequently encountered issue is discovery of an expert’s report and discovery from the expert. In 1985, in Flach v. Flach, 114 A.D.2d 929, 495 N.Y.S.2d 202 (2nd Dept. 1985), the Second Department held that a spouse could not obtain a copy of a pension evaluation report prepared by the other spouse’s expert, ruling that the report was immunized from disclosure as material prepared for litigation. Flach came down just as the Legislature was enacting revisions to CPLR 3101(d) to allow limited disclosure from experts. Moreover, court rules have made some inroads by compelling the exchange of expert reports.

Under the revised statute, each party, upon request from the other, must identify the experts he or she intends to call at trial and must disclose in reasonable detail the subject matter of the expert testimony, the substance of the facts and opinions on which expert is expected to testify, the qualifications of the witness and a summary of the grounds for the opinion. CPLR 3101(d). Note that there is no stated time for requesting the information and no stated time for giving a response. Where for good cause a party retains an expert an insufficient time before trial to give appropriate notice, the party is not to be precluded from introducing the expert testimony solely on grounds of noncompliance with the statute. Rather, the court may make whatever order may be just. CPLR 3101(d)(1)(i).

There is an often overlooked provision in the CPLR provision dealing with disclosure from experts. While it is often assumed that the summary descriptions authorized by statute are the limit of what can be requested, it should not be overlooked that CPLR 3101(d)(iii) permits further disclosure concerning expected expert testimony by court order upon a showing of special circumstances. The court order must make provisions in order to restrict the scope of disclosure to appropriate matters. It also important for the court order to provide for responsibility for the payment of the expert’s fees and the other expenses of the disclosure.

There is relatively little reported caselaw on this subject in the matrimonial area, though there is much in the personal injury field. One of the few cases to touch on this subject in the matrimonial context is Vicinanzo v. Vicinanzo, 193 A.D.2d 962, 598 N.Y.S.2d 362 (3rd Dept. 1993). There, the Third Department held that the trial court’s decision to strike the testimony of the husband’s expert on the value of his law practice was not an abuse of discretion. Plaintiff wife had made known her intention to call an expert, and the substance of testimony, prior to trial. Defendant husband did not retain an expert until late in the trial and his excuse was found to be disingenuous. Additionally, defendant offered no excuse for his failure to disclose the credentials and expected testimony of the expert witness during the brief period between the time that the expert was hired and the time the expert was called to the stand.

Under the court rules governing matrimonial matters (22 NYCRR § 202.16[g]), each expert that a party expects to call at trial must submit a written report. Apparently, oral reports will not do the job. This prevents a party from doing an end run around the rules by simply asking the expert to give an oral report, thus avoiding the disclosure requirements of the rules.

The rules further provide that, except where good cause is shown, the reports exchanged between the parties shall be the only reports admissible at trial. 22 NYCRR § 202.16(g). Thus, a party cannot offer one report for exchange purposes and then offer a substantively different report at trial. Of course, the expert would be able during trial to testify to any necessary changes or amendments to his or her opinion.

The written reports are to be exchanged and submitted to the court no later than 60 days before the date set for trial. Reply reports, if any, are to be exchanged and submitted no later than 30 days before the date set for trial. Failure to comply may result in preclusion. Late retention of experts and consequently late reports shall be permitted only upon a showing of good cause under the statutory formulation set forth in CPLR 3101(d)(1)(i).

In Fisher v. Fisher, 159 Misc.2d 1115, 608 N.Y.S.2d 383 (Sup.Ct. N.Y. County 1994), defendant husband moved for production of the reports issued by experts for plaintiff wife and for leave to depose the experts. The request was denied by the court on the ground that there was no legal basis for the request, citing Flach. The exchange rule was inapplicable because the matrimonial rules apply only to actions commenced after November 30, 1993 and Fisher was commenced prior to the effective date.

It would also appear that no trial date had been set in Fisher and the matrimonial rules, where applicable, measure the exchange point from that trial date not yet set.

As to deposition of the experts, Fisher ruled that no pre-trial depositions would be allowed; the defendant would have the right, of course, to cross-examine the expert at trial. Similarly, in Nimkoff v. Nimkoff, 36 A.D.3d 498, 830 N.Y.S.2d 27 (1st Dept. 2007), the court upheld the denial of a deposition of court-appointed forensic evaluator. However, it was held appropriate for the trial court to have ordered that the expert’s file be produced for review three business days prior to the start of the hearing.

The issue of disclosure of expert reports is an intricate one involving litigation maneuvering and posturing. The party who does not have the asset (usually the less affluent spouse) has the burden of coming forward to prove value and may to have to do so by expert testimony. On the other hand, the party who has the asset may delay retaining an expert until after he or she learns what the other side’s expert has come up with. This is because the asset defending party may be pleased with the conclusion of the other side’s expert or may be hoping that the other side will not hire an expert at all. Naturally, the party who hired the expert is reluctant to disclose the report. Doing so may let the other side have the use of the report without having to pay for it. It may happen that the opposing counsel will simply offer to stipulate to the value reported by the expert. Since that would represent a complete capitulation to the expert’s conclusion, it would be hard to refuse to stipulate because of the nonpayment issue. If the opposing party intends to contest the report, giving the report in advance only serves to give that party more time to punch holes in the report.

This maneuvering impacts upon the ability of the parties and court to properly conference and prepare the case. Lack of disclosure of a report may impede settlement because settlement offers made by the side with the report cannot be evaluated by the other side, especially if the other side has not retained an expert. Additionally, the progress of trial may be impeded. Under the court rules, the court has discretion to allow the expert report to serve as substitute for direct examination. 22 NYCRR § 202.16(g). The admission of the report into evidence and the commencement of cross-examination will be delayed if counsel first sees the report on trial and needs time to digest it.

The rules do not expressly provide for what happens if only one side has a written report. Presumably the side with the report can tender it to both opposing counsel and court, but that may open the door to a belated request for late submission by the opposing side. It would not be surprising to hear counsel argue that the magnitude of the expert’s errors caught them by surprise. Alternatively, the court could direct that the report be submitted only to the court, with opposing counsel getting a copy only later in the case. This way the court will know where the expert is coming from, but not opposing counsel.

Another approach is for the court to use its authority to appoint independent experts. The court has the authority to appoint an independent appraiser. 22 NYCRR § 202.18; Zirinsky v. Zirinsky, 138 A.D.2d 43, 529 N.Y.S.2d 298 (1st Dept. 1988). Under the matrimonial court rules, the court is to hold a prompt preliminary conference. The conference is to be held within 30 days after the action is assigned to an individual judge. At the preliminary conference, the court must fix a schedule for disclosure and should direct the parties to submit a list of expert witnesses from which the court may pick an neutral expert. While the rules do not explicitly provide for disclosure of the neutral expert’s report to both counsel, it is both customary--and fair--for both sides, and the court, to have access to the report. In custody cases, counsel are sometimes given only the right to read (but not copy) sensitive reports. Where the expert report concerns financial matters, there seems little, if any, reason why both sides should not have copies of the reports.

The parties may have obligations to update, amend, and supplement their discovery responses. Snow v. Snow, 209 A.D.2d 399, 618 N.Y.S.2d 442 (2nd Dept. 1994) emphasizes the continuing nature of matrimonial disclosure. In Snow, the wife wanted to obtain records relating to business entities in which the husband had sold his interests. While such a sale would ordinarily seem to put an end to issues of valuation, the sale would not be conclusive if not done in an arms length transaction or if it was an illusory transaction in which the transferor spouse stayed involved behind the scenes. Perhaps for those reasons, the Appellate Division in Snow held that the wife was entitled to obtain various types of records. What is especially notable is that the court ruled that each spouse is entitled to discovery of assets up to the date of trial. For that reason, the court compelled the disclosure of documents up through the present time, a disclosure to be accomplished within 60 days of the appellate decision.

Snow certainly is on point in holding that each party is entitled to up to date financial information. The difficulty is a practical one; discovery must end at some point. There will necessarily be an interval between completion of discovery and the commencement of trial; in what manner do counsel demand updated information and in what manner is that information supplied?

A good starting point is CPLR 3101(h), which generally requires that discovery responses be promptly amended or supplemented where it is learned that a prior response was incorrect or is no longer correct and complete. Under this rule, the burden is on the responding party to notify the adverse party that something needs to be changed. This provision fits well with such discovery tools as depositions and interrogatories. A party who has testified at a deposition, or submitted interrogatory answers can readily apprise the other side that a given answer needs to be changed or amended. The exact form of the amendment or supplement should fit the circumstances, but in general the change should be reported in a form equivalent to the form in which the original information was provided. For example, if a deposition answer needs to be changed, marking up the transcript will not do. If the transcript has already been executed and returned, an amendment or supplement to sworn testimony should take the form of a sworn statement. On the other hand, if the information was originally provided in an unsworn manner (for example, a notice or letter from counsel indicating what documents exist), it would seem fair to allow the amendment or supplement to be made in the same manner.

But the amendment or supplementation requirement of CPLR 3101(h) is triggered by the realization that a response was incorrect, or if originally correct is no longer correct, and that to let it stand would be materially misleading. While responding parties may try to construe that language in their favor, ultimately the court will be the judge of whether CPLR 3101(h) has been met.

It might be prudent if, at the conclusion of discovery, counsel affirmatively request that notification be given of various events (e.g., pay increases, new employment, etc.) or be given copies of statements (e.g., bank statements, canceled checks). Responding counsel should try to achieve some reasonable accommodation. It may be too much, and unnecessary, to keep exchanging every possible financial document (e.g., every bank statement, credit card statement, etc.). However, it is fair to say that both sides are entitled to know about any material change in the financial condition of the other side.

Where a party is asserting that since completion of discovery, he or she has suffered a worsening of financial circumstances, failure to give timely notice and discovery with respect to the new event invites the court to preclude the introduction of evidence pertaining to that change. If there has been a change for the better, failure to disclose may result in either a motion for a continuance, or if the case goes to decision, a motion to set aside or modify the court’s determination.

De La Roche v. De La Roche, 209 A.D.2d 157, 617 N.Y.S.2d 767 (1st Dept. 1994) addressed the discoverability of two commonly sought items: a spouse’s passport and the fee bills rendered by the spouse’s counsel. The passport question is not a particularly difficult issue. Since foreign travel usually involves expense, and can involve either business or pleasure, passports should be discoverable as bearing on the parties’ lifestyles or their expenses. Foreign travel may also be a tip-off to possible secretion of assets in other countries. Nor is there any particular privilege or protection ordinarily afforded to passports.

Fee bills involve far more sensitive considerations. Under the disciplinary regulations applicable to domestic relations matters, attorneys are required to regularly provide their clients with itemized bills. 22 NYCRR § 1400.3. Since attorneys are usually retained on the basis of an hourly rate, clients are entitled to see, not just a statement of the total hours worked, but an itemization of who did the work, what work was done, and the amount of time consumed. Such bills often set forth who the attorney spoke with, what documents the attorney looked at, and the subject matter (and sometimes the content) of attorney-client discussions. The itemization is for the client’s benefit and the bills themselves are attorney-client communications for privilege purposes.

When a party seeks an award of counsel fees, that party may be required to demonstrate to the court what services have been rendered to date. Sometimes counsel try to meet that requirement by providing a narrative statement of services (which may be based on time sheets and bills), other counsel may submit the bills and time sheets themselves. But, however the application is made, it seems to be understood that in connection with a fee award made at trial, the party resisting the application is entitled to inspect the time sheets and bills rendered by applicant’s counsel. This is because the party resisting the application is entitled to challenge whether the services are compensable under the statutes involved, whether the services were necessary, and whether the time charged was reasonable. While the fee bills and time sheets are privileged, the privilege has, in effect, been waived by the making of a counsel fee request.

Fee bills rendered by the non-applying side, however, are not subject to a waiver argument. In Match v. Match, 168 A.D.2d 226, 562 N.Y.S.2d 115 (1st Dept. 1990), the First Department held that it was error to require the husband to disclose to the wife the time records kept by his counsel. The wife’s attorney had poor records and wanted the records of the adversary to help establish the wife’s counsel fees. It was error, ruled the court, to require such disclosure.

But in De La Roche, the First Department, without citation to Match, held that the fee bills of the husband should be produced for in camera inspection by the trial court. This is a curious ruling, since the court acknowledged in its decision that fee bills are privileged, or at the very least reflective of work product. Nevertheless, the trial court is to look at the bills in camera in order to make sure that the bills are entitled to protection as privileged.

In Teich v. Teich, 245 A.D.2d 41, 665 N.Y.S.2d 859 (1st Dept. 1997), the court permitted the party whose legal bills were sought to redact (block out from view) all information except the amount of time charged for a particular service and the dollar amount of the charge. This seems to sweep too far the other way. In order to check whether the time claimed for the particular service was appropriate, it would be necessary to know at least something about what the service was for which a charge was being made.

In terms of discovery procedure, a note should be made of Barnes v. Barnes, 96 A.D.2d 894, 466 N.Y.S.2d 61 (2nd Dept. 1983). There, the court, while noting the limitations on the use of deposition notices to obtain documents for use at the depositions, upheld broad descriptions of documents where those categories are reasonable under the circumstances.

DRL Section 236, Part B, subdivision 4(a) provides that noncompliance with disclosure requirements is punishable by the penalties prescribed by CPLR 3126. The ultimate sanction is to dismiss the pleading of the disobedient party. However, even where the pleading of a party is stricken as a penalty for nondisclosure and the party prohibited from offering any affirmative evidence at trial, the party may not be denied the right to cross-examine the witnesses called by the adverse party. See Grande v. Grande, 129 A.D.2d 612, 514 N.Y.S.2d 250 (2nd Dept. 1987).

The courts have long recognized that equal access to financial information is key to an effective and fair equitable distribution determination. Each party is entitled to conduct a searching exploration to discover the extent of marital property, the extent of separate property, to uncover hidden assets and waste and to develop information that may bear on the determination of the financial issues. In the early years of equitable distribution, the courts recognized the importance of ensuring fair access to relevant financial data by issuing orders directing recalcitrant parties to furnish information found by the court to be appropriate for discovery. And courts took a broad and liberal view of what should be open for examination. Yet, there also remained a tendency to be forgiving of spouses who, for one reason or another, refused to comply with court ordered discovery. An order compelling discovery may not mean much unless the court is prepared to put the force of its authority behind its directives.

Tough sanctions may be imposed those who deliberately refused to comply with court discovery orders. Cahen-Vorburger v. Vorburger, 12 A.D.3d 275, 785 N.Y.S.2d 435 (1st Dept. 2004), leave to appeal denied, 4 N.Y.3d 706, 795 N.Y.S.2d 517 (2005) (order of preclusion proper and use of indirect methodology to value husband’s business proper in light of husband’s contumacious failure to provide disclosure); Fucci v. Fucci, 166 A.D.2d 551, 560 N.Y.S.2d 833 (2nd Dept. 1990) (defendant’s answer stricken due to deliberate, repeated refusal to furnish documents); Demis v. Demis, 168 A.D.2d 840, 564 N.Y.S.2d 515 (3rd Dept. 1990) ($3,500 sanction imposed, rather than preclusion order); Fontanella v. Fontanella, 167 A.D.2d 185, 561 N.Y.S.2d 576 (1st Dept. 1990) (fee award based on noncompliance with order to furnish a net worth statement); Kandel v. Kandel, 129 A.D.2d 617, 514 N.Y.S.2d 404 (2nd Dept. 1987) (preclusion order granted); Grande v. Grande, 129 A.D.2d 612, 514 N.Y.S.2d 250 (2nd Dept. 1987) (answer and counterclaim stricken, possible preclusion order at inquest); see alsoDe Arakie v. De Arakie, 169 A.D.2d 660, 565 N.Y.S.2d 40 (1st Dept. 1991) (on temporary support motion, unfavorable inference drawn against husband who failed to provide requested income tax returns). The refusal of the courts to allow themselves to be paper tigers and their willingness to invoke, where appropriate, stern sanctions to remedy deliberate discovery defaults will go a long way towards deterring dilatory or stone-walling tactics.

In Spector v. Spector, 18 A.D.3d 380, 797 N.Y.S.2d 437 (1st Dept. 2005), the husband was ordered precluded where he willfully failed and refused to provide wife with documents properly demanded. As part of the preclusion order, the court found that money that the husband had placed in a trust and then “invested” or “loaned” to a speculative startup company derived either from marital property or the children’s custodial account and ordered him to restore it. See also Lotardo v. Lotardo, 31 A.D.3d 504, 818 N.Y.S.2d 568 (2nd Dept. 2006) (husband conditionally precluded from testifying as to issue of his income unless he provided certain financial documents and paid an attorney’s fees; sanction imposed due to failure to provide court-ordered discovery).

Nevertheless, the punishment must be made to fit the crime. Thus, in Klutchko v. Baron, 1 A.D.3d 400, 768 N.Y.S.2d 217 (2nd Dept. 2003) the Appellate Division held that an order of preclusion against the husband, and a prohibition against the husband’s conducting further discovery, was improvidently imposed as a sanction for his failure to supply a stenographer at the wife’s deposition. Such failure was not willful, deliberate, contumacious, or in bad faith. While the husband also had failed to appear before a special referee with nonparty witnesses, this failure was also excusable as the referee’s appointment was for purposes of supervising the depositions of the parties, as opposed to nonparties. Monetary sanctions were held to be a sufficient sanction.

There are also limits to the sanctions that may be imposed. The court may not, as a discovery sanction, order that an asset be permanently paid over to the innocent party. SeeSandoro v. Sandoro, 303 A.D.2d 938, 757 N.Y.S.2d 667 (4th Dept. 2003). Such a direction could be made as part of the final determination at the end of the case; it may not be made as an interlocutory discovery sanction.

The court may not grant a motion to preclude evidence, or deem issues resolved, as a discovery sanction, where the motion was made orally during the conference in the absence of formal notice that such relief was being requested. Warner v. Houghton, 43 A.D.3d 376, 841 N.Y.S.2d 499 (1st Dept. 2007), affirmed, 10 N.Y.3d 913, 862 N.Y.S.2d 321, 892 N.E.2d 385 (2008).

Where a party has willfully failed or refused to produce documents, precluding that party from using the documents at trial, by itself, is not a very effective sanction. In that circumstance, it is inherent in the situation that the party did not believe the documents to be helpful to his or her position; if the documents were helpful, not hurtful, the party would have willfully produced them, not willfully secreted them. To provide effective redress to the discovering party, as well as to encourage litigants to produce relevant documents, the court should, as a sanction, deem the claims of the discovering party’s, as to which the absent documents are pertinent, to be true. Miceli v. Misceli, 233 A.D.2d 372, 650 N.Y.S.2d 241 (2nd Dept. 1996). In this fashion, the risk of factual error occasioned by the absence of relevant documents falls on the party who had the documents but who wilfully failed to produce them. To avoid such errors, the party need only produce the documents as required.

An attorney who prepares discovery responses which are, to the attorney’s knowledge inaccurate and evasive may be subject to professional discipline. In re Bruno, 47 A.D.3d 233, 847 N.Y.S.2d 216 (2nd Dept. 2007) (attorney suspended for two years on basis of providing inaccurate and evasive discovery responses in matrimonial matter; attorney also had prior letters of admonition and caution and had prior suspension for mental disability).

Under the Uniform Rules for the Supreme and County Courts, in matrimonial actions, the court is to hold preliminary conferences for the purpose of planning the orderly progression of the case. One of the actions that the court may take at the conference is to establish a timetable for the completion of all disclosure proceedings. Under the rule, the court is to require that all disclosure proceedings be completed within six months of the conference, unless the time is otherwise shortened or extended by the court. 22 NYCRR § 202.16 (subd. f[2]). In a noncomplex case, the court is to fix a trial date not later than six months from the date of the conference (id., subd. f[3]), which presupposes an early completion of discovery.

While the courts have every right, if not a duty, to insist that matrimonial cases move expeditiously through the pre-trial stage to trial, the court must be sensitive not to deprive the parties of a reasonable time to conduct discovery. InTrach v. Trach, 162 A.D.2d 678, 557 N.Y.S.2d 112 (2nd Dept. 1990), the Appellate Division ordered a new trial on the financial issues between the parties because the wife had not been afforded a reasonable opportunity to complete discovery and to obtain appraisals and valuations. In that case, the husband had noticed the case for trial within four months of joinder of issue. Likewise, in Katsaros v. Katsaros, 133 A.D.2d 611, 519 N.Y.S.2d 718 (2nd Dept. 1987), the Appellate Division concluded that three months was not a sufficient time to obtain discovery in a case involving a lengthy marriage and a spouse who was reluctant to make disclosure.

When the court exercises its authority to fix a deadline for the completion of discovery, the court must allow a reasonable time for the completion of necessary discovery. In determining how much time is reasonable, the court must take into account such factors as the length of the marriage, the extent of the assets, and the degree to which the parties have cooperated with each other in providing disclosure. Thus, where the marriage is short, the assets few, and the parties have voluntarily complied with requested disclosure, the time allowed for completion of disclosure may be appropriately circumscribed. However, where the marriage is lengthy, the assets numerous, the financial issues complex, and the wealthier spouse is resisting disclosure, the court should be more liberal in the amount of time afforded for completion of discovery. Indeed, setting a short time limit may play into the hands of a spouse who is resisting legitimate discovery requests. A resisting spouse need only make a motion for a protective order, which has the effect of staying discovery (CPLR 3103 [subd. b]), in order to raise havoc with the ability to comply with a short discovery timetable. Discovery may grind to a halt while the motion is under judicial consideration. Even if the motion is denied, the discovering party may find time running too short to pursue discovery.

The court should also have the flexibility to make adjustment in the discovery schedule as warranted by subsequent developments. For example, if cooperation is replaced with resistance, or if additional assets are uncovered which must be explored, more time may be necessary for discovery than originally believed.

Since the advent of equitable distribution, efforts have been made by spouses to rush through the divorce aspect of matrimonial actions, leaving the economic issues to be resolved at a later date. The initial tactic was the device of “reverse” partial summary judgment. This procedure called for the defendant spouse to admit part, if not all, of plaintiff’s divorce claims and then ask the court to grant plaintiff an immediate divorce judgment. Plaintiffs were not particularly receptive to this approach, because of possible irreparable prejudice to their economic rights. The economic issues might be delayed, at the behest of a defendant who only wanted out of the marriage, and, if defendant died, the proceeding would abate, with plaintiff having lost the right to take against a will and lost rights in insurance and benefit programs. The reverse summary judgment concept was validated by at least some courts, seeLeeds v. Leeds, 94 A.D.2d 788, 463 N.Y.S.2d 38 (2nd Dept. 1983), appeal dismissed, 60 N.Y.2d 641, 467 N.Y.S.2d 568, 454 N.E.2d 1311 (1983), but was ultimately proscribed by legislative action. See CPLR 3212 (subd. e); Kahrs v. Kahrs, 111 A.D.2d 370, 489 N.Y.S.2d 584 (2nd Dept. 1985).

With the demise of reverse partial summary judgment, efforts have been directed at bifurcation of the matrimonial action. Bifurcation calls for the matrimonial claims to be tried first, with the economic issues to be tried separately thereafter. Bifurcation can be an efficient, neutral means of organizing the matrimonial trial. For example, where divorce is contested, it may be advisable to try the divorce issues first, since the nature of the economic issues will be dependent upon the outcome of the divorce aspects, i.e. unless the marriage is dissolved, equitable distribution will not be available. However, in this, bifurcation does not pose prospects for prejudice where the trial flows seamlessly from one issue to the next and no interlocutory judgments are entered. Indeed, this type of trial procedure is not really bifurcation at all, but merely an approach which informally breaks the trial into stages.

On the other hand, bifurcation can involve the holding of a trial on the matrimonial issues, and the rendition of a separate judgment thereon, prior to the trial of the economic issues. Indeed, there have been efforts to hold the trial of the matrimonial aspects while disclosure is still proceeding--and is not complete--on the economic issues. Where the parties consent to this procedure, and the court allows it, there is no difficulty since the parties can chart their own course through the courthouse. However, to address the matrimonial aspects upfront, with the economics to follow at an unspecified future date, over the objections of a party, invites the same type of evils that the Legislature sought to prevent by banning reverse partial summary judgment. The risk is that the wealthier spouse will have an incentive to delay the case, and may complicate it by forming a second family unit, before the rights of the first family are protected. Moreover, in the event of death of the wealthier spouse, the less affluent spouse and children may be left entirely unprotected.

The courts have recognized the dangers inherent in bifurcation of the matrimonial aspects from the non-trial ready economic issues. As a general rule, the court should not order bifurcation of a matrimonial action, over the objections of a party, where disclosure on the economic issues is not complete. SeeCampbell v. Campbell, 171 A.D.2d 720, 567 N.Y.S.2d 175 (2nd Dept. 1991); Fiorella v. Fiorella, 132 A.D.2d 643, 518 N.Y.S.2d 17 (2nd Dept. 1987), appeal dismissed 70 N.Y.2d 796, 522 N.Y.S.2d 113, 516 N.E.2d 1226. Where disclosure is complete on all issues, there is generally little need for a total bifurcation, since the entire case can be heard at once.

In considering whether to consent to bifurcation, counsel should be sure to reflect upon the risks inherent in the entry of a judgment of divorce prior to resolution of the economic issues. The entry of a divorce will terminate the right to take against a will and may also preclude coverage under medical insurance plans and other benefit programs. See EPTL § 5-1.2. Moreover, there may be less obvious consequences. In Wood v. Wood, 139 A.D.2d 506, 526 N.Y.S.2d 608 (2nd Dept. 1988), the date of entry of an interlocutory judgment of divorce was utilized as the date for valuation of the marital assets. As a result, where the marital assets are appreciating in value, counsel should consider the effect that an interlocutory judgment may have on the client’s ability to share in the appreciation.
 
C236B:21: Disclosure of the “Merits”

An area of controversy is whether disclosure can be had on the “merits” of the parties’ matrimonial causes of action. Prior to the advent of Equitable Distribution, the Appellate Divisions had divided on the question. The First Department’s holding was that no such disclosure was obtainable; the Fourth Department and lower court cases in the Third Department ruled that it was.

The First Department and Fourth Department have each adhered to the principles followed in each prior to equitable distribution. The Second Department has joined the First in ruling out disclosure of the merits of matrimonial claims.

The First and Second Departments’ rulings on the issue were influenced by the Second Department’s holding in Blickstein v. Blickstein, 99 A.D.2d 287, 472 N.Y.S.2d 110 (1984) that marital fault is generally not an equitable distribution factor. The Blickstein rule has since been adopted by the Court of Appeals. O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 489 N.E.2d 712 (1985).

In Van Ess v. Van Ess, 100 A.D.2d 848, 474 N.Y.S.2d 90 (2nd Dept. 1984) the Second Department held that, in view of its Blickstein holding, there was no room to argue that disclosure on the merits was an element of full financial disclosure. However, the Van Ess court also rejected the sought-after disclosure in view of the failure of the discovering party to show that such disclosure was needed to “establish her cause of action for divorce”. 474 N.Y.S.2d at 92. This suggests that, in those rare instances when such disclosure is needed to establish the cause of action, it might be obtained. Likewise, in Kaye v. Kaye, 102 A.D.2d 682, 478 N.Y.S.2d 324 (2nd Dept. 1984), the court declined to allow the wife to compel her husband to separately list expenses paid on behalf of an alleged correspondent, holding that the data was not needed to establish her divorce claim and was not necessary to determine the husband’s income.

The Second Department adhered to its general policy of not permitting disclosure on the merits of matrimonial causes of action in Corsel v. Corsel, 133 A.D.2d 604, 519 N.Y.S.2d 710 (2nd Dept. 1987).

The First Department case is McMahan v. McMahan, 100 A.D.2d 826, 474 N.Y.S.2d 974 (1st Dept. 1984). There, the First Department stated its general agreement with Blickstein and held that, in view of that and in view of its tendency to exacerbate an already acrimonious relationship, merits discovery should not generally be allowed. The court left the door open for merits discovery in “exceptional” or “compelling circumstances”. A dissent argued that fault should be a factor in equitable distribution and maintenance and discovery on it should be permitted.

The discovery sought in McMahan might well have been justified on different grounds. What the discovering wife wanted were copies of all tape recordings and transcripts thereof of conversations in which she participated. Such a request, irrespective of the issue of “merits” discovery, would seem entirely allowable under CPLR 3101(e) which entitles a party to obtain “a copy of his own statement”.

In Lemke v. Lemke, 100 A.D.2d 735, 473 N.Y.S.2d 646 (4th Dept. 1984), the Fourth Department adhered to its pre-equitable distribution holdings that merits discovery is allowable. The court held that, in view of many recent Domestic Relations Law changes, there was no rational reason why less than full disclosure should be the rule in matrimonial actions, particularly in view of the availability of protective orders to guard against abuse.

This is not to say that, even in the two Departments which preclude generally “merits discovery”, only financial issues need be disclosed. For example, there is a line of cases holding that the Supreme Court, in a divorce action, has authority, under appropriate circumstances, to direct blood tests where the legitimacy of a child is in issue. M.M. v. El G., 98 A.D.2d 464, 470 N.Y.S.2d 659 (2nd Dept. 1984); Castronova v. Castronova, 94 A.D.2d 979, 464 N.Y.S.2d 62 (4th Dept. 1983).

Although the Court of Appeals in Wegman v. Wegman, 37 N.Y.2d 940, 380 N.Y.S.2d 649, 343 N.E.2d 288 (1975), held that a mental examination of a party can be directed in a matrimonial action in which the “physical condition” of that party is in issue, that power is not to be lightly exercised. More recently, the Court of Appeals concluded that, where a husband had long spent about one-half of his annual income on psychiatric treatment for himself, but did not claim that his mental condition prevented him from proving appropriate support, it was error to order him examined by a court-appointed expert.W.P. v. R.P., 61 N.Y.2d 777, 473 N.Y.S.2d 160, 461 N.E.2d 297 (1984). Cf.Slawiak v. Hollywood, 123 Misc.2d 435, 473 N.Y.S.2d 745 (Sup.Ct. Erie County 1984) (deposition of mother and second husband in preparation for post-judgment change of custody hearing refused due to overriding need not to delay hearing).

A different set of disclosure issues were addressed in Sansanelli v. Sansanelli, 122 Misc.2d 512, 471 N.Y.S.2d 775 (Sup.Ct. Suffolk County 1984). In that case, the wife commenced an action for divorce and other relief. There was a 1978 separation agreement and the husband argued that no discovery of his present financial circumstances could be allowed unless the agreement was set aside. However, the court viewed the complaint as really seeking more child support than allowed by the agreement. While plainly the courts would have the power to modify a judgment or support order upward in appropriate circumstances (seeBrescia v. Fitts, 56 N.Y.2d 132, 451 N.Y.S.2d 68, 436 N.E.2d 518 [1982]), no court order or judgment was in effect. Nonetheless, the best interests of the children and concern for their welfare prompted the court to allow the disclosure.
 
C236B:22: Disclosure in Actions to Rescind Agreements

Where an action seeks to set aside a marital or separation agreement made before the July 19, 1980 effective date of the Equitable Distribution Law, it has been generally held that in actions seeking to set aside separation agreements, disclosure is limited to issues relevant to the validity of the agreement. In essence, this means that, where a challenge to a pre-July 19, 1980 separation agreement is involved, disclosure of financial circumstances was restricted to the state of economic matters as of the time of the execution of the agreement; there generally may not be disclosure of a party’s more current financial status unless and until the agreement is set aside. E.g.,Ravel v. Ravel, 161 A.D.2d 547, 556 N.Y.S.2d 51 (1st Dept. 1990); Garguilio v. Garguilio, 168 A.D.2d 666, 563 N.Y.S.2d 840 (2nd Dept. 1990); Milts v. Milts, 87 A.D.2d 779, 449 N.Y.S.2d 231 (1st Dept. 1982); Potvin v. Potvin, 92 A.D.2d 562, 459 N.Y.S.2d 313 (2nd Dept. 1983); Gleeson v. Gleeson, 69 A.D.2d 964, 416 N.Y.S.2d 329 (3rd Dept. 1979), leave to appeal dismissed, 47 N.Y.2d 709, 419 N.Y.S.2d 1025, 393 N.E.2d 491 (1979); Schiffman v. Schiffman, 57 A.D.2d 519, 393 N.Y.S.2d 712 (1st Dept. 1977). However, if there is a dispute over compliance with the agreement or over computations made purportedly under the agreement, discovery should be available on those issues. SeeFeldman v. Feldman, 65 A.D.2d 566, 409 N.Y.S.2d 144 (2nd Dept. 1978). In addition, financial discovery may be available in connection with an application to fix or modify child support obligations. Sansanelli v. Sansanelli, 122 Misc.2d 512, 471 N.Y.S.2d 775 (Sup.Ct. Suffolk County 1984). But, where the party from whom discovery is sought is sufficiently wealthy as to be able to pay any reasonable award, broad financial disclosure may denied even as to issues of child support. Anonymous v. Anonymous, 258 A.D.2d 546, 683 N.Y.S.2d 893 (2nd Dept. 1999) (husband was multi-millionaire).

The vitality of the general rule precluding disclosure of current financial circumstances where a challenge is made to a separation agreement has been somewhat eroded where the agreement under challenge was made on or after July 19, 1980 and, hence, where the Equitable Distribution Law applies. Except to the extent that the Equitable Distribution Law may have undercut the prospect that courts may vitiate property settlement provisions on the ground of unconscionability, which is a matter of substantive principle, there is little that would affect disclosure with respect to property settlement provisions. Under prior law, even where unconscionability--the most liberal test--was applied, it was held that unconscionability must be found to exist, if at all, at the time the agreement is reached and cannot be made to depend upon subsequent experiences. Thus, discovery, as noted above, would be limited to the financial and other relevant circumstances existing at the time of the agreement, not as of the time of the action. Current financial matters would be relevant only if the agreement is set aside.

However, with respect to maintenance, the Equitable Distribution Law provides that spousal support provisions must meet two different standards, which apply at two different time periods. The agreement must be fair and reasonable when made and not unconscionable at the time of final judgment. DRL § 236, Part B, subd. 3 (clause 3). Hence, given the statutory standards, the financial circumstances of the parties at the time of the making of the agreement and at the time of final judgment are relevant. If final judgment is not entered until well after the making of the agreement, or if the issue of the validity of the agreement crops up in a divorce action, current, or at least more current, financial circumstances become relevant. To illustrate, if a conversion divorce action is pursued with respect to a pre-July 19, 1980 separation agreement, and the validity of the separation agreement is challenged therein, there generally would be no discovery as to current matters, except perhaps as such matters bear on child support, unless the agreement is set aside. However, under the Equitable Distribution Law, discovery should be available, as before, as to the circumstances at the time of the making of the agreement so that it can be determined if the agreement was fair and reasonable. In addition, discovery should be available as to current circumstances since final judgment is not yet rendered and the time period for testing unconscionability of maintenance provisions is still open.

One of the first cases to touch on this point is Tuckman v. Tuckman, 112 Misc.2d 803, 447 N.Y.S.2d 654 (Sup.Ct. Rockland County 1982). There the court held that, under equitable distribution, financial discovery is available, even though the agreement has not been as yet set aside, because the stricter scrutiny now to be given maintenance provisions of an agreement under DRL § 236, Part B, subd. (3), requires fuller disclosure of the financial circumstances.

More recently, it has been recognized that, since a request for disclosure made in the face of a separation agreement necessitates an assessment of at least the presumptive validity of the agreement, it is appropriate for the court, in weighing whether to allow the discovery, to decide the merit of the challenge to the agreement, even to the point of ruling the agreement valid. See Markovitz v. Markovitz, 29 A.D.3d 460, 816 N.Y.S.2d 419 (1st Dept. 2006) (appropriate for court to decide validity of agreement, where wife’s request for discovery and equitable distribution raised issue as to effect of agreement).

The competing considerations--the need for full disclosure and the need to guard against harassment in the form of burdensome efforts to renegotiate a fair and proper agreement--were addressed in Oberstein v. Oberstein, 93 A.D.2d 374, 462 N.Y.S.2d 447 (1st Dept. 1983). In Oberstein, the wife, in response to the husband’s action for a conversion divorce based upon a post-July 19, 1980 separation agreement, asserted that the agreement should be rescinded or reformed. She specifically sought awards of child support and maintenance. With her answer, she served a deposition notice which requested production of an extensive list of items relating to the husband’s assets and income for a period commencing four years before the making of the agreement and continuing to the then present date, which was well over a year after the making of the agreement. The husband resisted all disclosure on the grounds that, in view of the agreement, his finances were not relevant. The Appellate Division held that, under the new standards for review of agreements under the Equitable Distribution Law, it may be necessary to consider the parties’ relative financial positions in order to determine whether the statutory criteria were satisfied. The court, however, recognized the danger inherent in allowing wholesale fishing expeditions and, thus, held that more liberal disclosure could only be obtained upon a prima facie showing that there are circumstances which warrant a further examination of the facts underlying the agreement. Since the claims raised by the wife inOberstein were held to be conclusory in nature, she was barred from conducting a full financial inquiry.

Oberstein represents an effort to strike a balance between the policy favoring full disclosure and the competing policy which permits parties to enter into separation agreements with reasonable security that the agreement will largely be the end of the matter. The difficulty with this approach is the tension it creates when measured with the standards applied to motions for summary judgment on such issues. Summary judgment rejecting challenges to a separation agreement may be awarded only if no bona fide issues of fact are presented which warrant a trial. A party may have sufficient evidentiary allegations to preclude summary judgment, thus entitling that party to proceed with disclosure and to an ultimate trial. However,Oberstein suggests that while the party may have presented enough to stave off summary judgment, the same factual presentation may not be sufficient to warrant a full financial review.

It bears noting that, where the agreement was made before July 19, 1980, the additional discovery authorized by Tuckman and Oberstein is not available. SeePotvin v. Potvin, 92 A.D.2d 562, 459 N.Y.S.2d 313 (2nd Dept. 1983), supra; Sansanelli v. Sansanelli, 122 Misc.2d 512, 471 N.Y.S.2d 775 (Sup.Ct. Suffolk County 1984).

The general rule against disclosure of the post-agreement financial condition of a party was applied, with an unusual twist, inPacker v. Packer, 233 A.D.2d 261, 650 N.Y.S.2d 142 (1st Dept. 1996). The rule against such disclosure is usually invoked where the party attacking the agreement seeks to gain information about the financial condition of the party trying to trying to uphold the agreement, with the upholding party being the more affluent spouse. In Packer, the obverse occurred: the court shielded the post-agreement finances of the challenging party from disclosure sought by the upholding party.

In Packer, the former wife brought an action to set aside a divorce stipulation, charging, among other things, that the former husband prevented her from obtaining independent counsel, selected her attorney and then attended the two cursory meetings between her and counsel; that the former husband did not reveal the extent of his assets; and that no negotiations between the parties were ever conducted and that she had no input into the document that was presented for her signature. Some time after the stipulation was made, the former wife purchased a vacation home and the former husband sought to ask his former spouse at her deposition about the source of the money used to make the purchase. The court held that such questions were out of bounds, with the Appellate Division holding that the former wife’s finances at the time of the purchase were not material and relevant to her financial condition at the time the stipulation was signed. However, as pointed out by a dissenting justice, the source of funds the former wife used to make the purchase seemingly is relevant to her claim that she had no money to hire a lawyer at the time the separation agreement was entered. At the very least, since the purchase took place only one or two years after the making of the stipulation, questions about the source of the funds used to make the purchase would seem to be pertinent to whether the former wife had the funds at the time the stipulation was made. For example, if the former wife had made the purchase by using proceeds of a bank account which had not been disclosed, it would seem be appropriate to allow the former husband to find out whether the bank account existed at the time of the stipulation and, if so, how much was then in it. Likewise, if the former wife filled out a mortgage application in connection with her purchase of the vacation home, her statement of her assets in the application would seem to be pertinent, since only a relatively short time lapsed between the stipulation and the purchase. It is understandable that the courts would limit disclosure of post-agreement finances from a party who is seeking to rely upon the agreement. But, it is suggested that where a party comes into court to try to set aside an agreement, claiming in part that she did not have the funds to retain counsel at the time the deal was done, the door should be considered open to a somewhat broader inquiry into the attacking party’s assets than is the case with the upholding party. While a one or two year period from the making of the agreement would not seem to be so remote as to warrant shutting the door, the Appellate Division majority inPacker saw it the other way.
 
C236B:23: Equitable Distribution: When Available

Subdivision 5(a) of Part B of DRL § 236 identifies the circumstances when the court has authority to determine the rights of the parties to marital and separate property. While subdivision 2 of Part B sets forth the actions and proceedings to which Part B has general application, subdivision 5(a) carves out certain exceptions in respect of property determinations.

First, the court may not provide for a property distribution where the parties have settled the matter between themselves in an agreement made pursuant to subdivision 3. Subdivision 3 expressly provides that the parties to an antenuptial or separation agreement may make provision in their agreement for the ownership, division or distribution of separate and marital property. If the parties have exercised the option given them by subdivision 3 and their agreement contains provisions “for the disposition of their property”, court-ordered property division is not authorized. The phrase “agreement for the disposition of their property” should be regarded as requiring that the agreement effectuate a comprehensive settlement of the parties’ property rights. Cf.Gedraitis v. Gedraitis, 109 Misc.2d 420, 439 N.Y.S.2d 978 (Sup.Ct. Erie County 1981). An agreement which disposes of less than all property should not preclude equitable distribution of property which is not covered by the express terms of the agreement. Further, the barrier to equitable distribution erected by an agreement should fall if the agreement itself, or a pertinent provision, is not enforceable. While the statute does not on its face insist that the agreement be “valid”, the requirement for the agreement to be legally enforceable and free of taint is implicit. Indeed, if an agreement is set aside, the parties would be left in limbo as to their property rights unless the court proceeded to order an appropriate property distribution.

A property distribution is authorized only when the court grants matrimonial relief which has the effect of terminating or dissolving the marriage. The statute states that the action must be one in which “all or part of the relief granted is divorce, or the dissolution, annulment, or declaration of the nullity of a marriage.” The legislature made a policy judgment that marital property rights should not be determined and property distributed unless the marriage has been put to rest. Thus, where a divorce is denied, equitable distribution may not be granted, though the court may decide questions of support and counsel fees and other nonproperty issues. See Brady v. Brady, 101 A.D.2d 797, 475 N.Y.S.2d 470 (2nd Dept. 1984), affirmed, 64 N.Y.2d 339, 486 N.Y.S.2d 891, 476 N.E.2d 290 (1985). Thus, equitable distribution may not be directed where marital status relief is denied and the parties remained legally married. Where the granting of a divorce is reversed on appeal, the provisions of the judgment pertaining to equitable distribution must also be vacated. Matthews v. Matthews, 238 A.D.2d 926, 661 N.Y.S.2d 115 (4th Dept. 1997). This point was taken further inSchildkraut v. Schildkraut, 240 A.D.2d 649, 659 N.Y.S.2d 489 (2nd Dept. 1997). There, the husband was granted a divorce by the trial court and provisions for equitable distribution were made. The wife appealed and the appellate division reversed the judgment and dismissed the complaint. While the appeal was pending, however, the husband transferred to the wife, pursuant to the equitable distribution portion of the divorce judgment, proceeds of his retirement account. After the divorce was undone, the husband sought the return of the funds from the retirement account. The appellate division held that the trial court acted properly in granting the husband’s request. In short, the wife could not have it both ways; she could not resist the divorce yet retain the equitable distribution award made possible by the divorce judgment.

Actions in which only a separation is granted do not qualify as ones in which equitable distribution is available. Anglin v. Anglin, 80 N.Y.2d 553, 592 N.Y.S.2d 630, 607 N.E.2d 777 (1992). Nonetheless, here it must also be remembered that DRL Section 234 authorizes the court in separation actions to determine questions as to “title” to property and to make direction concerning the possession of property. Because Section 234 is procedural (see Kahn v. Kahn, 43 N.Y.2d 203, 401 N.Y.S.2d 47, 371 N.E.2d 809 [1977]) and because the legislature clearly intended not to permit property distributions to be made where only a separation is granted, the permissive authority given the courts in separation actions to consider “title” questions cannot be so far extended as to accomplish indirectly what cannot be done directly. As the very word “title” implies, the courts, in separation actions, are limited to adjudicating property disputes in accordance with traditional substantive principles governing who has “title.” Nonetheless, the courts under Section 234 plainly have authority to direct property transfers to the party having “title” and, indeed, even have the power to compel a sale of jointly-owned marital premises (including property held as tenants by the entirety) in connection with a judgment of separation. Martin v. Martin, 82 A.D.2d 431, 441 N.Y.S.2d 828 (2nd Dept. 1981); Kahn v. Kahn, supra. The courts further may make direction concerning the possession of property, including awards of exclusive occupancy of the marital home.

It appears settled that equitable distribution of marital property is available where the court declares the marriage to be void. It is somewhat surprising that this is even an issue in light of the express statutory language. DRL § 236, Part B, subdivision 5, provides that equitable distribution is to be made in an action in which the court grants a divorce or “the dissolution, annulment or declaration of the nullity of a marriage”. The statute, thus, expressly provides for equitable distribution when the court declares a marriage to be a nullity, i.e. void.

The weight of authority is that equitable distribution is available even though the marriage is declared void. SeeLobotsky v. Lobotsky, 122 A.D.2d 253, 505 N.Y.S.2d 444 (2nd Dept. 1986); Brandt v. Brandt, N.Y.L.J., November 19, 1987 (Sup.Ct. Kings County). In Stimpfle-Jones v. Jones, 124 A.D.2d 869, 508 N.Y.S.2d 635 (3rd Dept. 1986), appeal dismissed 69 N.Y.2d 1037, 517 N.Y.S.2d 1030 (1987), which involved the declaration of the nullity of a marriage purportedly entered into by a life inmate, the court expressly stated that equitable distribution applies to actions for a declaration of the nullity of a void marriage. However, in that case, the court found it “incongruous” to make any award to a civilly dead, life inmate.

Nonetheless, it should be noted that in Rashkov v. Rashkov, 137 Misc.2d 824, 522 N.Y.S.2d 782 (Sup.Ct. Nassau County 1987), the court held that equitable distribution is not available where a marriage is declared void. The court reasoned that, where a marriage is declared void from its inception, no valid marital relationship existed and no marital property was acquired. The court also concluded that the express language of subdivision 5 was not applicable because that language speaks of the declaration of the “nullity” of a marriage, rather than a declaration of the nullity of a “void” marriage.

The trend over the past several decades has been to eliminate any economic differences that might result over the form in which the marriage relationship is terminated. Important economic rights should not be made to depend upon whether the marriage is terminated by divorce, annulment, or declaration of nullity. SeeGaines v. Jacobsen, 308 N.Y. 218, 124 N.E.2d 290 (1954), overruling Sleicher v. Sleicher, 251 N.Y. 366, 167 N.E. 501 (1929). The Legislature’s list of qualifying actions is broad; it seems highly doubtful that the Legislature intended to make the availability of equitable distribution turn on whether the marriage is ended by divorce, or is annulled or declared a nullity. The Legislature’s plain purpose was to provide for equitable distribution when a marriage is legally terminated and, surely, a declaration of nullity does exactly that.

The Equitable Distribution Law mandates that property be equitably distributed by the court in a qualifying matrimonial action. The mandatory nature of equitable distribution was stressed in Harrell v. Harrell, 120 A.D.2d 565, 502 N.Y.S.2d 57 (2nd Dept. 1986). There, the defendant husband was unable to explain what happened to some $40,000 in marital property. The trial court declined to make any equitable distribution, apparently on the ground that the husband had succeeded in either spending the marital property or hiding it. The court held that the mandate of the statute cannot be avoided by wrongful conduct in retaining, secreting or dissipating the marital assets. Presumably, the appropriate remedy in such situations is the entry of a distributive award which can be reduced to judgment and enforced. Moreover, the victimized spouse should also be allowed a greater share out of any remaining marital assets.

The counterpoint case is Seeley v. Seeley, 135 A.D.2d 703, 522 N.Y.S.2d 603 (2nd Dept. 1987). There, the court found that marital funds were expended, prior to the demise of the marriage, by both parties for their mutual benefit. As a result, no claim could be asserted for such funds.

The view seems to be that, where one party, prior to (or even after) the commencement of the action, secretes or dissipates assets, such actions do not defeat the right of the other party to equitable distribution. However, parties may not use the courts to reargue spending decisions, made in good faith prior to the demise of the marriage. See Mahoney-Buntzman v. Buntzman, 12 N.Y.3d 415, 881 N.Y.S.2d 369, 909 N.E.2d 62 (2009); Johnson v. Chapin, 12 N.Y.3d 461, 881 N.Y.S.2d 373, 909 N.E.2d 66 (2009).

In Sperber v. Schwartz, 139 A.D.2d 640, 527 N.Y.S.2d 279 (2nd Dept. 1988), the court held that the death of a spouse ordinarily abates any proceedings to obtain equitable distribution. This holding is consistent with traditional decisions that a matrimonial action abates upon the death of one of the parties thereto. SeeCornell v. Cornell, 7 N.Y.2d 164, 196 N.Y.S.2d 98 (1959). The Sperber case, though, makes two important points.

Sperber implicitly confirms this principle that there are no vested rights in equitable distribution. While the commencement of a matrimonial action triggers the possibility that an equitable distribution of marital property may ensue, the commencement of the action does not guarantee that an award will be made. An award might not be made for any number of reasons, including, failure to obtain termination of the marriage and death of a litigant. As a result, no rights in equitable distribution vest upon commencement of the action. See alsoLeibowits v. Leibowits, 93 A.D.2d 535, 462 N.Y.S.2d 469 (2nd Dept. 1983) (concurring opinion); Matter of Schurm v. Union National Bank, 116 Misc.2d 255, 455 N.Y.S.2d 532 (Sup.Ct. Greene County 1982); but seeKriger v. Kriger, N.Y.L.J., August 6, 1982 (Sup.Ct. N.Y. County).

Sperber is also noteworthy for the factual context in which it arose. The wife had commenced a divorce action against her husband. While the divorce case was pending, the wife was found dead, under circumstances which suggested to some the possibility of foul play. The matrimonial action abated upon the wife’s death. In an attempt to pursue a claim against the husband for the equitable distribution that the wife hoped to obtain in the matrimonial action, the wife’s father, as administrator of her estate, brought an action against the husband. It was argued that the husband, either intentionally or negligently, contributed to the wife’s death and should be estopped from asserting any defense to any post-death claim for equitable distribution.

The Appellate Division concluded that the matrimonial action abated, thus precluding any claim for equitable distribution. It appears that the court had no choice but to rule as it did; after all, equitable distribution is available only as an ancillary relief in a matrimonial action following the granting of judgment which terminates the marriage. Because the wife died before her divorce action could be heard, the marriage terminated by her death, and no divorce judgment could thereafter be obtained.

The Appellate Division found it unnecessary to decide whether the rule might be different had the husband intentionally caused his wife’s death. The court held that there were no factual allegations to substantiate such a claim in the Sperber case. The court did conclude that allegations of the husband’s negligence in failing to provide security measures were not sufficient to warrant an exception to the general rule of abatement.

However, where a divorce is obtained prior to the death of a spouse, proceedings to obtain equitable distribution do not abate and equitable distribution does not abate. Peterson v. Goldberg, 180 A.D.2d 260, 585 N.Y.S.2d 439 (2nd Dept. 1992). If the court decides to grant a divorce, even if the decision is not yet finalized in a judgment, and a spouse dies, the right to equitable distribution vests with the decision and the death of the party does not abate the claim to equitable distribution. Estate of Agliata v. Agliata, 222 A.D.2d 1025, 636 N.Y.S.2d 255 (4th Dept. 1995); McGovern v. Getz, 193 A.D.2d 655, 598 N.Y.S.2d 9 (2nd Dept. 1993).

It is not the formal entry of judgment that is important, since that is a ministerial action. It is whether the court decided to grant a divorce prior to the time that one of the spouses died. If the court did not decide to grant the divorce before the death of one of the parties, then the divorce action abates and the equitable distribution claim is extinguished.

While the commencement of a matrimonial action triggers the possibility that an equitable distribution of marital property may ensue, the commencement of the action does not guarantee that an award will be made. An award may not be made for any number of reasons, including failure to obtain termination of the marriage and the death of a litigant. As a result, no rights to equitable distribution vest upon commencement of the action. On the other hand, once the court decides that a divorce will be granted or that the marriage will otherwise be terminated, equitable distribution is then assured and the right to it vests. The subsequent death of a party will not divest either the surviving spouse or the estate of the deceased spouse of the right to equitable distribution that had already vested.
 
C236B:24: Marital Property to be Distributed “Equitably”

Subdivision 5(c) of DRL § 236, Part B, provides that “marital property shall be distributed equitably between the parties, considering the circumstances of the case and of the respective parties.”

This provision is the key to the entire Equitable Distribution Law. As noted by Governor Carey in his approval memorandum, New York now recognizes, by the force of this provision, that the marriage relationship is also an “economic partnership”. Upon dissolution of the marriage, “property acquired during the marriage should be distributed in a manner which reflects the individual needs and circumstances of the parties regardless of the name in which such property is held.” McKinney’s 1980 Session Laws of New York, p. 1863.

Equitable means what is fair, just and right in consideration of the facts and circumstances of each individual case. In mandating that the court distribute marital property to the parties “equitably”, the Legislature has empowered the courts to divide marital property justly and fairly. The court “shall do equity”. Cf.Painter v. Painter, 65 N.J. 196, 320 A.2d 484, 490 (1974). Under former law, title was dispositive and a spouse who, for whatever reasons, did not have title was generally deprived of any property interest, absent actual fraud, and notwithstanding the contributions made to the marriage by that spouse. This was unjust and inequitable since form controlled substance and a spouse who faithfully and loyally devoted himself or herself to the betterment of the family could be and often was deprived of the tangible fruits of his or her labors. The Equitable Distribution Law has put an end to the perpetuation of this injustice. To end injustice, the court is authorized, indeed directed, to do justice. The court has not been left unaided in its search for what is just. The Legislature has enumerated specific factors for consideration and has also opened the door for the court to consider any other factor which the court may find to be just and proper. The factors are separately discussed, infra. But the benchmark is clear: the court must do justice to the parties, with fairness and with due regard to the circumstance of each individual case. Reasonable people can reasonably differ as to what is fair and just in particular circumstances. At the time the Equitable Distribution Law was before the Legislature, there was concern, particularly among women’s groups, that “equitable” distribution vested too much discretion in the courts and a firmer standard was needed. A rival “equal” distribution law was proposed which would have mandated a fifty-fifty division of marital property. This proposal was voted down by the Legislature in favor of “equitable” distribution but even the proponents of “equitable” distribution voiced the opinion that, more often than not, equal distribution should be the rule. Thus, the Assembly Memorandum in Support of the Equitable Distribution Law states: “Upon the dissolution of a marriage there should be an equitable distribution of all family assets accumulated during the marriage.... From this point of view, the contributions of each partner to the marriage should ordinarily be regarded as equal, and there should be an equal division of family assets, unless such a division would be inequitable under the circumstances of the particular case.”

The legislative record thus bespeaks an intent for the courts to direct “equal” distribution unless the circumstances of an individual case clearly require an “unequal” distribution. However, a legislative preference for “equal” distribution is not expressly set forth in the statute. It does not appear in subdivision 5(c) nor does it appear in the statutory criteria. (See subdivision 5(d)). Indeed, a general rule in favor of “equal” distribution is at least partially contradicted by the requirement that the court consider specific factors, with the weight of each factor to be balanced by the court in arriving at a just determination.

In a number of decisions, the appellate courts have stressed that equitable distribution does not necessarily mean equal distribution. See, e.g., Arvantides v. Arvantides, 106 A.D.2d 853, 483 N.Y.S.2d 550 (4th Dept. 1984), modified, 64 N.Y.2d 1033, 489 N.Y.S.2d 58, 478 N.E.2d 199 (1985); Naimollah v. De Ugarte, 18 A.D.3d 268, 795 N.Y.S.2d 525 (1st Dept. 2005) (unequal distribution affirmed in view of findings that husband contributed little to family); Holmes v. Holmes, 25 A.D.3d 931, 807 N.Y.S.2d 217 (3rd Dept. 2006) (wife awarded 25% after six year, childless marriage in which she made only limited contributions); Booth v. Booth, 24 A.D.3d 1238, 807 N.Y.S.2d 259 (4th Dept. 2005) (70/30 split in favor of husband, where husband contributed most of the family’s support and was primary caretaker of children); Granade-Bastuck v. Bastuck, 249 A.D.2d 444, 671 N.Y.S.2d 512 (2nd Dept. 1998); Feeney v. Feeney, 241 A.D.2d 510, 661 N.Y.S.2d 26 (2nd Dept. 1997); Dugan v. Dugan, 238 A.D.2d 741, 656 N.Y.S.2d 769 (3rd Dept. 1997); Lester v. Lester, 237 A.D.2d 872, 654 N.Y.S.2d 528 (4th Dept. 1997); Selinger v. Selinger, 232 A.D.2d 471, 648 N.Y.S.2d 470 (2nd Dept. 1996); Fiedler v. Fiedler, 230 A.D.2d 822, 646 N.Y.S.2d 839 (2nd Dept. 1996); Winnie v. Winnie, 229 A.D.2d 677, 645 N.Y.S.2d 167 (3rd Dept. 1996); Ciaffone v. Ciaffone, 228 A.D.2d 949, 645 N.Y.S.2d 549 (3rd Dept. 1996); Rauch v. Rauch, 226 A.D.2d 1141, 641 N.Y.S.2d 212 (4th Dept. 1996); Fleitz v. Fleitz, 223 A.D.2d 946, 636 N.Y.S.2d 911 (3rd Dept. 1996). For example, in Puglisi v. Puglisi, 16 A.D.3d 477, 791 N.Y.S.2d 181 (2nd Dept. 2005), where the parties lived separate economic lives during their marriage, the wife was awarded the parties’ Cape Cod residence, subject to a cash credit, and the wife was awarded all of the interest in her pension. Nonetheless, there is also recognition that in treating with equitable distribution in the context of a long-term marriage, the distribution of marital property should be equal or as close to equal as possible. Meza v. Meza, 294 A.D.2d 414, 743 N.Y.S.2d 122 (2nd Dept. 2002); Williams v. Williams, 245 A.D.2d 49, 665 N.Y.S.2d 86 (1st Dept. 1997); Repka v. Repka, 186 A.D.2d 119, 588 N.Y.S.2d 39 (2nd Dept. 1992); Perri v. Perri, 97 A.D.2d 399, 467 N.Y.S.2d 226 (2nd Dept. 1983); Roth v. Roth, 97 A.D.2d 967, 468 N.Y.S.2d 764 (4th Dept. 1983).

There is no fixed rule that the distribution of assets must be equal, even in a marriage of long duration. Solomon v. Solomon, 307 A.D.2d 558, 763 N.Y.S.2d 141 (3rd Dept. 2003), leave to appeal dismissed, 1 N.Y.3d 546, 775 N.Y.S.2d 242, 807 N.E.2d 292 (2003) (distribution of assets from a long-term marriage in which the wife received 55% of the parties’ property, and the husband received 45%, was equitable where the parties’ primary assets were illiquid and the real estate owned by the parties originally came from the wife’s family). Unequal shares have been awarded notwithstanding that the marriage was of long duration. See Hathaway v. Hathaway, 16 A.D.3d 458, 791 N.Y.S.2d 631 (2nd Dept. 2005) (70/30 division in favor of the wife in 33-year marriage sustained where the husband refused to work, which was contrary to the wife’s wishes; while the husband did devote substantial time to the children’s activities, the wife was the sole wage earner and performed substantially all housekeeping duties and was equally involved with the children; the husband’s contribution to the marriage was minimal); K. v. B., 13 A.D.3d 12, 784 N.Y.S.2d 76 (1st Dept. 2004) (65/35 division in favor of the wife because of her greater contributions in supporting the family and raising the children and the husband’s lack of contribution to the marriage, notwithstanding provisions of invalid prenuptial agreement which contemplated an equal distribution of property).

There is no requirement that the same distribution percentage be applied to all of the marital assets. The court may find it appropriate to generally divided the marital property equally while decreeing an unequal distribution of a specific asset. For example, in Granade-Bastuck v. Bastuck, 249 A.D.2d 444, 671 N.Y.S.2d 512 (2nd Dept. 1998), the parties were married for 11 years, during which the husband was the sole provider. While the first seven years of the marriage were childless, the court noted that the wife had made noneconomic contributions, which allowed the parties to amass a substantial marital estate. Accordingly, the court ruled that it was appropriate to generally divide the marital property equally. However, as to the husband’s law practice, the court noted that the wife had not put the husband through law school, nor did she help support him during the early years of the marriage prior to the birth of their child. Thus, the defendant became a partner in the law firm, and acquired his economic interest in the practice, without any substantial contribution from the wife. While the wife’s later role as the primary caretaker of the child entitled her to some economic recognition, it was not appropriate to apportion the economic value of the law firm equally. The court held that wife’s share of the law practice should be fixed at 25%, rather than 50%. InWagner v. Dunetz, 299 A.D.2d 347, 749 N.Y.S.2d 545 (2nd Dept. 2002), the court, while directing an equal division of the parties’ liquid assets, granted the husband only 25% of the value of the wife’s interest in her private medical practice, given the husband’s continuance of his own medical career and his making of only indirect contributions to the wife’s practice. Similarly, in Chalif v. Chalif, 298 A.D.2d 348, 751 N.Y.S.2d 197 (2nd Dept. 2002), the wife was awarded only a 25% share of the husband’s medical practice, where the husband had completed all but two years of his neurosurgical residency at the time of the marriage, the wife made no direct contributions to the practice and had made only modest indirect contributions. It should be noted that the impact of the limitation on the percentage of wife’s interest in the husband’s practice was not such as to prevent her from receiving a sizeable award. Her distributive award still exceeded $2,500,000.

A distributive award of only 25% of the marital property sustained in view of relatively short length of marriage and the wife’s minimal contributions as spouse, mother and homemaker, though it should be noted that the distributive award was substantial, amounting to over $1.7 million. Miller v. Xiao Mei, 295 A.D.2d 144, 743 N.Y.S.2d 103 (1st Dept. 2002), leave to appeal denied, 100 N.Y.2d 502, 760 N.Y.S.2d 765, 790 N.E.2d 1194 (2003). Similarly, in Corasanti v. Corasanti, 296 A.D.2d 831, 744 N.Y.S.2d 614 (4th Dept. 2002), the court sustained an award to the wife of 30% of the enhanced value of the husband’s medical license, while simultaneously awarding nothing on account of the husband’s Ph.D. in biochemistry. The court found that, although wife’s efforts contributed to husband’s to obtain his medical license and advanced degrees, those achievements were accomplished primarily through his own ability and effort. On the other hand, the value of money withdrawn by the husband in contemplation of the action treated as a marital asset and wife awarded 60% of the marital assets in Niland v. Niland, 291 A.D.2d 876, 737 N.Y.S.2d 214 (4th Dept. 2002).

In Jafri v. Jafri, 176 Misc.2d 246, 671 N.Y.S.2d 589 (Sup.Ct. Rockland County 1997), the court held that, where the husband was the support of the family for at least some part of the time during which the wife was obtaining medical education and training, but did not sacrifice his own career or assume a disproportionate share of household work or child care as a consequence of the wife’s pursuit of her career, and the parties did not defer the acquisition of assets during the period of the wife’s training, the husband’s share of the value of the wife’s medical license would be fixed at 25%.

The court may not offset financial obligations of one parent, such as equitable distribution, against child support paid to, or owed to, another parent. The issues of the parents’ rights and liabilities between themselves are independent of the support of their children and financial issues between the parents should not be resolved at the expense of their children. Thus, it was error to offset amounts due the husband from the wife on account of marital debt payments against child support, both in the future and arrears, due the wife from the husband. Koren v. Koren, 279 A.D.2d 829, 719 N.Y.S.2d 347 (3rd Dept. 2001). Note that, while the court held that such an offset was contrary to public policy, it also stated, at least twice, that this principle was offended by an arrangement imposed without the wife’s consent. This leaves open the possibility that the parties could validly agree to such an offset or that the court could have imposed it had the wife indicated her consent to it. Moreover, the foregoing considerations apply once the equitable distribution award has been fixed. In determining the equitable distribution award, consideration may be given topendente lite maintenance payments. In Johnson v. Chapin, 12 N.Y.3d 461, 881 N.Y.S.2d 373, 909 N.E.2d 66 (2009), the Court of Appeals held that where a pendente lite maintenance award is excessive, the matrimonial court may, in its final decision, grant a credit, in the property distribution, to the obligor spouse for the amount by which the temporary maintenance paid exceeded the amount of maintenance that would have been paid under the final award. In Johnson, the husband’s income, for temporary support purposes, was imputed to be substantially higher than what it actually was, resulting in a higher temporary maintenance award than his actual income would have warranted. On the other hand, the Court held in Johnson that it would be contrary to public policy to give the husband a similar credit for the portion of the excessive temporary award that was for child support.

In Garner v. Garner, 307 A.D.2d 510, 761 N.Y.S.2d 414 (3rd Dept. 2003), leave to appeal denied, 100 N.Y.2d 516, 769 N.Y.S.2d 203, 801 N.E.2d 424 (2003), the appellate court upheld an award to the husband of all of the proceeds of an investment account funded with the proceeds of his recovery for a personal injury. Even though his deposit of the funds into a joint account deprived the funds of their separate property character, the court found that the husband needed the funds in light of the seriousness of his injuries, the continued impairment of his physical condition, and his daily pain. In Farrell v. Cleary-Farrell, 306 A.D.2d 597, 761 N.Y.S.2d 357, 3 A.L.R.6th 803 (3rd Dept. 2003), the appellate court sustained an award to the husband of only 7 1/2% of the present value of the wife’s license as a dental hygienist where, although the husband was the primary wage earner for the family and contributed to the costs of the wife’s education, he did not substantially alter his schedule as the result of the wife’s schooling, his duties in the house did not really change, and he worked out of town, leaving early and occasionally remaining away late or overnight, with the result that that wife had to maintain the household and care for the parties’ young child while at the same time pursuing her education. See also Corbett v. Corbett, 6 A.D.3d 766, 775 N.Y.S.2d 89 (3rd Dept. 2004) (wife properly awarded 90% of travel trailer where it had a modest value and wife had preserved it by paying the monthly charges for it from the time that husband left the marital residence).

Where there is a debt associated with an asset, the party who receives the asset should ordinarily be responsible for paying the associated debt; however, the receiving party is entitled to a credit for the marital debt he or she is to repay. See Soles v. Soles, 41 A.D.3d 904, 837 N.Y.S.2d 762 (3rd Dept. 2007). Alternatively, the amount of the debt associated with the asset should be deducted when calculating a party’s distributive share. Loria v. Loria, 46 A.D.3d 768, 848 N.Y.S.2d 681 (2nd Dept. 2007) (mortgages incurred during marriage are marital debts and mortgage liability should be deducted in calculating distributive share).
 
C236B:25: Equitable Distribution--The Legislative Factors

Subdivision 5(b) of the Part B of DRL § 236 sets forth 13 specific factors which the court “shall” consider in determining an equitable distribution. In addition, a further additional factor is identified in Subdivision 5(h) of Section 236. From the use of the word “shall”, it is apparent that the Legislature intended the courts to consider all of the enumerated factors but left the relative weight to be accorded to each factor in a particular case to the determination of the court. As noted in the Assembly Memorandum in Support of the Equitable Distribution Law, these factors are “guidelines”; the Legislature recognized that it “was impossible to specify determinations because of the diversity of facts which may be involved.”

As originally enacted, there were 9 specific statutory factors listed in Subdivision 5(d), rather than 13. Three more, present Factors 11, 12, and 13, were added in 1986. The factor identified in Subdivision 5(h) was added in 1992. Present Factor 5 was added in 2009, causing the renumbering of the subsequently listed Factors. Former Factor 10, which allows the court to consider any other factor it finds appropriate, has been renumbered Factor 14. These additions and renumberings should be taken into account in reviewing cases which cite to particular factor numbers.

Factor 1--The court is required to consider the income and property of each party both at the time of the marriage and at the time the matrimonial action was commenced. The intent is to obtain the proven track record of the parties by comparing the financial state of each at the time the marital relationship began with the financial state of each at the time the action was commenced. The court must look at the earning power and property each spouse brought into the partnership and the earning power and property of each at the time dissolution proceedings were commenced. The implication is that the spouse with lesser earning power and less property may be deserving of a greater share of marital property since the other spouse may more readily start afresh.

The time periods are the same as those set forth in connection with the definition of marital property, see Part B, subdivision 1(c), and has the same drawback. A spouse who sees marital difficulties on the horizon as well as a potential significant increase in earnings or property is given an incentive to commence a divorce action before the earnings increase or the property is acquired. The court apparently has no authority to consider increases in income or property occurring after the commencement of the action. A spouse who is aggrieved by such tactics is probably best advised to try to defeat the other spouse’s action, without counterclaiming so that if the case is dismissed, a new action could be brought in which the increased income or property might arguably be subject to inclusion for equitable distribution.

The income of both parties is to be considered. There is an interesting decision which holds that where the husband had remarried, had a child by his second wife, and took the role of “house husband”, the income of the second wife was marital property of the second marriage which could be used as a source for the payment of child support for the child of the first marriage. Matter of Felisa L. v. Allen M., 107 Misc.2d 217, 433 N.Y.S.2d 715 (Family Ct. Bronx County 1980). While in an equitable distribution proceeding, there generally will not be a new spouse in the picture (except where a foreign divorce was obtained), the Felisa L. decision suggests the possibility that where either spouse has entered into a new relationship, any support furnished by the third party might be imputed, to some degree, to the spouse.

The statute refers to “property of each party”. The reference is keyed to the form in which title is held before equitable distribution concepts are introduced, as there is no mention of “separate” or “marital” property. Property which would be exempt by operation of law might not be included in the analysis compelled by Factor 1. On the other hand, property which would be regarded as “separate” by state statute should be included. Factor 1 may suggest that where one spouse has extensive separate property, fairness may require that the other spouse receive a greater share of marital property.

Factor 2--The court is required to consider the length of the marriage and the age and health of the parties. The required consideration of the duration of the marriage permits the application of a concept similar in nature to that established by the Court of Appeals in Hessen v. Hessen, 33 N.Y.2d 406, 353 N.Y.S.2d 421, 308 N.E.2d 891 (1974); see also, Brady v. Brady, 64 N.Y.2d 339, 486 N.Y.S.2d 891, 476 N.E.2d 290 (1985). In Hessen, the Court held that a stricter degree of proof is required to terminate a marriage on the ground of cruelty where the parties had a marriage of long duration and old law would bar support to a wife found guilty of marital misconduct.

While Factor 2 is not concerned with the degree of proof required to establish fault grounds, it does suggest that greater financial protection and special consideration should be given to spouses, particularly the more dependent spouse, in a long term marriage. The longer the marriage, the more likely it is that the parties’ financial positions have been affected by the marital relationship. Moreover, while the existence of children of the marriage is not an express factor, in a longer marriage, it is more probable that the parties have had children and that one spouse remained at home or sacrificed a full-time career in order to care for the children. In addition, in a longer marriage (even a childless one), it is all the more likely that the parties relied upon the marriage being an economic partnership and based their financial decisions on the existence of that partnership. Reliance, and the fact that the length of the marriage itself may indicate there is substantial marital property, fully warrant taking the duration of the marriage into account when determining what property distribution would be equitable. Consideration of this factor is all the more necessary where one spouse (usually the wife) has become economically dependent upon the other. This may occur both where one spouse has remained at home as the homemaker and where the greater income and resources of the other spouse have permitted the spouse to follow less remunerative careers.

On the other hand, where a marriage is of short duration, there is less time for one party to become dependent on the other. Indeed, the economic partnership, if there was one, may be weak. Kobylack v. Kobylack, 110 Misc.2d 402, 442 N.Y.S.2d 392 (Sup.Ct. Westchester County 1981), modified on other grounds, 96 A.D.2d 831, 465 N.Y.S.2d 581 (2nd Dept. 1983), reversed and remanded on other grounds 62 N.Y.2d 399, 477 N.Y.S.2d 109, 465 N.E.2d 829 (1984), modified 111 A.D.2d 221, 489 N.Y.S.2d 257 (2nd Dept. 1985), is illustrative. Although the parties were married for approximately ten years, both spouses proceeded in their chosen careers in exactly the same manner as if they had not been married. In that case, the court found it appropriate to apportion the marital property in accordance with the parties’ economic contributions. A like result should obtain in most situations where the marriage is of much shorter duration. If the duration of the marriage is only a year or two or three, and there are no children, the shortness of the marriage may warrant precluding either spouse from profiting unduly simply because he or she was married to a spouse possessed of greater income or assets. Thus, where the marriage is short in duration, the nontitled spouse may receive a diminished award. See Miller v. Xiao Mei, 295 A.D.2d 144, 743 N.Y.S.2d 103 (1st Dept. 2002), leave to appeal denied, 100 N.Y.2d 502, 760 N.Y.S.2d 765, 790 N.E.2d 1194 (2003) (distributive award of 25% of marital property sustained in view of relatively short length of marriage and wife’s minimal contributions as spouse, mother, and homemaker, though it should be noted that the distributive award was nevertheless substantial, amounting to over $1.7 million).

The age and health of the parties are also consideration under Factor 2 and were also identified as considerations in Hessen. These factors are clearly relevant to consideration of the future financial conditions of the parties. Advanced age or ill health may preclude a spouse from the pursuit of a full-time career and may, thus, warrant receipt of a greater share of marital assets. Age may be a factor even where the party is not so advanced in age as to be considered elderly. For example, where a homemaker spouse has been out of the job market for many years, age may adversely impact upon his or her ability to successfully enter or re-enter the economic marketplace. On the other hand, relative youth may indicate that the spouse would be able to achieve relative financial security by his or her own efforts.

The factors of age, health, and duration of a marriage form a triad and may properly be considered together in making an assessment of the weight to be given of Factor 2.

Factor 3--This factor requires the court to consider whether it is appropriate to physically breakup the marital residence at the time of the divorce or whether the interests of children and their custodian require that the home and its furnishings remain intact while the children develop and mature. Under both DRL § 234 and § 236, Part B, subdivision 5(f), the court has authority to provide that one of the spouses be given the exclusive occupancy of the marital residence. Such authority is appropriately exercised in order to minimize the disruption of the lives of minor children, and preserve their home environment.

Where an exclusive occupancy award is appropriate, Factor 3 gives the court two options. It may order the spouse holding title to the marital residence and its furnishings to convey title immediately to the custodial spouse. This may result in an injustice, however, if the marital home and its furnishings constitute the bulk of the marital assets, and the other spouse lacks the ability to transfer property which would equitably recompense the spouse for his or her equitable share of the residence and its personal property. An alternative is to delay a disposition of the marital residence until the children are grown. See Litwack v. Litwack, 237 A.D.2d 580, 655 N.Y.S.2d 613 (2nd Dept. 1997) (residence to be sold when children turn 18 or are sooner emancipated). This requires that major assets of the marriage remain frozen for what may be a considerable period of time and the noncustodial spouse is effectively deprived of the use or transferability of his or her interest in the property.

The court also could determine that, under the circumstances, it would be appropriate to order an immediate sale of the property and require both spouses and the children to relocate. This may be considered in situations where custody of the children is divided on an equal or near equal basis. In Mazzone v. Mazzone, 290 A.D.2d 495, 736 N.Y.S.2d 683 (2nd Dept. 2002), the court held that the husband had failed to show that the marital residence should be subject to an immediate sale. The court granted exclusive occupancy to the wife, until the parties’ child reaches age 18 or is otherwise emancipated. The wife was sufficiently disabled as to be eligible for social security disability, was unable to stand for long periods of time, and was incapable of returning to her previous occupation as a legal secretary for the foreseeable future.

Factor 3 does not mandate that the court follow any given course. It is given the flexibility to do what is most appropriate under the particular circumstances. If the court directs that a sale be postponed into the future, it may nonetheless provide in its judgment for the manner in which the proceeds of such future sale are to be divided. (SeeEttinger, supra). Indeed, under prior law, an award of exclusive occupancy precluded a partition action during the effective period of the award and the courts were encouraged to state the terms and conditions of a future sale in the final judgment “so that disputes and irritants do not linger and present further incentives for litigation.” Ripp v. Ripp, 38 A.D.2d 65, 327 N.Y.S.2d 465, 470 (2nd Dept. 1971), affirmed on opinion of Appellate Division, 32 N.Y.2d 755, 344 N.Y.S.2d 950, 298 N.E.2d 114 (1973).

Where the court grants exclusive occupancy, it is preventing the excluded party from maintaining an action in partition to compel the sale of the property. The court’s grant of exclusive occupancy should be limited to a defined period of time. If the court order or judgment is not limited to an express period of time, the right to exclusive occupancy will be deemed limited to a reasonable duration. Haines v. Haines, 254 A.D.2d 516, 678 N.Y.S.2d 171 (3rd Dept. 1998). In that case, exclusive occupancy was awarded to the custodial mother in a 1980 divorce judgment. In 1991, the father agreed to sign a mortgage to the property, with the implied understanding that the property would not be sold until the mortgage had been paid off at the end of its 10 year term. However, in 1997, the father sought to compel the sale of the property. The court denied his application, holding that, while the divorce judgment did not provide a time limit on the period of exclusive occupancy, it was appropriate, and a reasonable period of time, for the exclusive occupancy period to run until the mortgage was satisfied, by which time the parties’ youngest child will have attained age 21.

Factor 4--Consideration of the loss of inheritance rights was first introduced by DRL § 170-a, enacted after the Court of Appeals decision in Gleason v. Gleason, 26 N.Y.2d 28, 308 N.Y.S.2d 347, 256 N.E.2d 513 (1970). DRL § 170-a was designed to remedy the situation where the parties separated pursuant to a judgment or agreement prior to the Gleason decision only to discover that pursuant to Gleason the judgment, decree or agreement could form the basis for a conversion divorce which would cut-off inheritance rights. DRL § 170-a provides that where a conversion divorce was obtained against a spouse based upon a pre-Gleason separation decree, judgment or agreement, the spouse may maintain an action to recover the value of any economic or property rights lost by virtue of the divorce, at least where an annulment or misconduct would not be a bar.

Factor 4 permits the court to take the loss of inheritance rights directly into account where the action involves a pre-Gleason separation decree, judgment or agreement. Factor 4 also expands on DRL § 170-a since loss of inheritance rights may be considered even where there was annulment or such fault as would preclude relief under DRL § 170-a.

Moreover, Factor 4 is generally applicable to all actions which qualify for equitable distribution. It opens the door for some consideration of separate property since that property would qualify for inheritance purposes. SeeMartinez v. Martinez, N.Y.L.J., October 13, 1981, p. 17, col. 5 (Sup.Ct. Nassau County).

The statute speaks of “loss” of pension rights. This seems to imply that the value of those rights at the time of judgment be ascertained and an appropriate share of that value be set aside for the other spouse, if that is fair and equitable. The statute does not seem to mandate or authorize that a share of the benefits be made available to the other spouse if, as, and when received. Of course, if one spouse is receiving pension or retirement pay at the time of the proceeding, that money should be treated as income, unless precluded by law.

The court may also consider the loss, upon divorce, of rights to share in a family trust fund. Riechers v. Riechers, 178 Misc. 2d 170, 679 N.Y.S.2d 233 (Sup.Ct. Westchester County 1998), affirmed, 267 A.D.2d 445, 701 N.Y.S.2d 113 (2nd Dept. 1999).

Factor 5--In 2009, the Legislature added a new Factor 5 to provide that the loss of health insurance benefits upon dissolution of the marriage is a factor to be considered in equitable distribution. (L.2009, ch. 229, effective as to actions commenced on or after September 16, 2009). While the matrimonial court has the authority to order a spouse to purchase or maintain health and hospital insurance for the other spouse or the children, the fact is that where only one spouse works outside the home and has access to group coverage, the other spouse is mostly likely covered as a dependent and will lose dependent status upon divorce. The Legislature has separately added a new Section 255 to the Domestic Relations Law to require the court to notify the parties that, once a judgment has been signed, a party may no longer be eligible for coverage under the other spouse’s plan. (L.2009, ch. 143, which also repeals a prior statutory effort at such notification, Section 177; the requirements of Section 255 are discussed in the Practice Commentary to that Section).

While the non-employed spouse may obtain continuation coverage through the federal COBRA statute for up to 36 months, that coverage is costly. Moreover, the COBRA continuation coverage ends after 36 months. The Assembly Memorandum in Support notes that the loss of health insurance can be financially devastating. Allowing the court to take the financial consequences of loss of health insurance (either immediately or deferred for three years) into property distribution (and maintenance) permits the court to adjust the property distribution and maintenance awards to account for the additional expense.

While the statute applies only in cases commenced after its effective date, the courts could consider loss of health insurance upon divorce in earlier commenced cases under the “wild card” factor, Factor 14.

Factor 6--The court is directed to consider whether an award of maintenance has been made to one of the spouses. If an award has been made, the court should consider the amount and duration of the award, apart from the very fact of the award. Where an award has been made, the payor spouse may require ownership of a greater share of marital property in order to assure that spouse of sufficient means and assets to fund the award. This is particularly apt where the property is income-producing. On the other hand, the needy spouse may require less marital property where the award is significant and of long duration.

The major purpose of Factor 5 is to insure that the court can fully integrate the major elements of an over-all financial determination. It should be noted, however, that the court is not expressly empowered to consider the effect of an award of child support. If need be, the court may consider the effect of a child support award by resort to the catch-all provision of Factor 14. Generally, however, child support should not be considered. Child support is designed to provide for the care and needs of children and, at least in theory, is not a benefit which is personal to the custodial parent. See Holterman v. Holterman, 3 N.Y.3d 1, 781 N.Y.S.2d 458, 814 N.E.2d 765 (2004).

Maintenance must be considered particularly where maintenance would be paid out of income considered for other purposes, such as the valuation of a business interest or professional license or degree. See McSparron v. McSparron, 87 N.Y.2d 275, 639 N.Y.S.2d 265, 662 N.E.2d 745 (1995).

The implementation of equitable distribution itself may require consideration of maintenance. For example, where a retired spouse is receiving pension payments, equitable distribution of the payments to a younger, employed spouse may generate a need for maintenance for the retired spouse. Rado v. Rado, 298 A.D.2d 887, 747 N.Y.S.2d 870 (4th Dept. 2002). The court could consider refusing to equitably distribute the pension payments. Tax issues need to be considered. The pension payments are taxable to the retired spouse; the earned income is taxable to the employed spouse. On the other hand, the retired spouse may not deduct the share of the pension payments paid over to the employed spouse; the employed spouse may be able to deduct the maintenance payments paid to the retired spouse. However, the court could order the pension payments to be divided on a net-of-taxes basis, if sufficient information is provided. Likewise, the court could order that the maintenance payment be nondeductible.

Factor 7--This factor is primarily geared to the traditional family in which one spouse (usually the husband) is the breadwinner and the other spouse (usually the wife) remains at home, full or part time, to care for the children and manage the household. The premise is that non-monetary contributions to a marital partnership are vital and that the homemaker spouse is entitled to have those efforts taken into account when marital property is divided. But the statute is broader than that.

Factor 7 identifies certain types of contributions which may give rise to an equitable claim to a share of marital property to which title is held by the other spouse. Such a claim may arise from a direct or indirect contribution made by the nontitle-holding spouse to the acquisition of the very property at issue. For example, in the case of the marital residence, the nontitle-holding spouse may have directly contributed to the acquisition of the residence by providing a portion of the purchase money by application of separate property. An indirect contribution might be found where the parties had a modest residence, the nontitle-holding spouse contributed labor or services which improve the value of the residence, and that residence was sold and a more luxurious residence acquired. Another sort of indirect contribution might be found where both parties had employment and decided that the paycheck of one spouse should be put aside into savings or investment. If the savings account or investment was held only in the name of the spouse whose earnings were saved, the other spouse, by whose wage earnings the savings or investment was made possible, may have an equitable claim to a share of the property.

An important application of the indirect contribution is in the case of the spouse who remains at home to care for children or to maintain the household, thereby freeing the other spouse to pursue economic activity which leads to the acquisition of marital property, though held solely in the name of the economically active spouse alone.

Factor 7 also recognizes the role of the spouse who contributes to the career or career potential of the other spouse. This covers the spouse who entertains the other spouse’s employer, clients, customers and business associates. It also covers the spouse who makes it possible for the other spouse to improve his or her career potential through the pursuit of advanced education or training. A wife who provides the funds to enable her husband to go to law school would not be deprived of the benefit of her contribution, as was the case under former law. SeeMorgan v. Morgan, 81 Misc.2d 616, 366 N.Y.S.2d 977 (Sup.Ct. N.Y.County 1975), affirmed in part and reversed in part on other grounds, 52 A.D.2d 804, 383 N.Y.S.2d 343 (1st Dept. 1976), appeal dismissed, 40 N.Y.2d 843, 387 N.Y.S.2d 839, 356 N.E.2d 292 (1976).

Under Factor 7, the court is given the flexibility to consider equitable claims for relief which stem from significant contributions made to the marriage, even if those contributions were non-economic in nature. The weight to be afforded such equitable claims will necessarily depend on the facts of the particular case. The spouse who maintains the home, helps out in the other spouse’s business, cares for the children, entertains clients, runs the myriad of daily household errands and performs the household chores surely is entitled to have those labors considered. Thus, where the wife contributed greatly in supporting the family and raising the children, and the husband contributed little, her equitable claims supported a 65/35 division of property in her favor, even though the marriage was of long duration. K. v. B., 13 A.D.3d 12, 784 N.Y.S.2d 76 (1st Dept. 2004). A more indolent spouse may be entitled to less consideration. Thus, in Sade v. Sade, 251 A.D.2d 646, 675 N.Y.S.2d 119 (2nd Dept. 1998), the appellate court reduced the husband’s share of the marital assets from 50% to 20%, citing the husband’s minor and insignificant economic and noneconomic contributions to the marriage.

Factor 8--This factor requires the court to consider whether various items of marital property consist of cash or can be readily converted into cash. There may be property which cannot be readily sold (such as an interest in a closely held business) or which could be sold but only at a significant loss (such as stock which has sharply declined in price but which may improve in value at a later time). Application of Factor 8 may indicate to the court that it is appropriate to order a distributive award or to order an allocation for marital property by physical exchange rather than reduction to cash. Generally, the court should try to avoid distributing all the liquid assets to one spouse while leaving the other spouse with only illiquid assets.

Factor 9--This factor requires the court to make an informed prediction as to how each spouse is likely to fare economically in the future. A spouse whose economic future is bright may be better able to withstand a less than equal property distribution, whereas a party whose future economic condition is more cloudy, may require a greater share of marital property for financial security. The duration of the marriage, the age and the health of the parties, considerations under Factor 2, come into play in this factor also.

Factor 10--Marital property is defined so as to sweep within it all property acquired during the marriage, including interest in a professional practice or closely held business. Cf. Part B, subdivision 1(c). However, it may not always be possible to place a precise value upon business or professional practice and there may be ethical or legal prohibitions against assigning an interest in a professional practice or license to a spouse who lacks the requisite training and experience.

Factor 10 must be read together with Part B, subdivision 5(e), which authorizes the court to make a distributive award in lieu of an actual allocation of a share in a business, corporation or profession.

Factor 11--The court is enjoined to consider the tax consequences to each party. This factor was an express factor in maintenance and, though prior to the 1986 amendment was not an express equitable distribution factor, tax consequences were considered by courts on a discretionary basis under former Factor 10 (now Factor 13). SeeTereszkiewicz v. Tereszkiewicz, 128 A.D.2d 605, 512 N.Y.S.2d 862 (2nd Dept. 1987); Povosky v. Povosky, 124 A.D.2d 1068, 508 N.Y.S.2d 722 (4th Dept. 1986); Jerkovich v. Jerkovich, 100 A.D.2d 575, 473 N.Y.S.2d 507 (2nd Dept. 1984); Ryan v. Ryan, 92 A.D.2d 889, 459 N.Y.S.2d 863 (2nd Dept. 1983); Nolan v. Nolan, 107 A.D.2d 190, 486 N.Y.S.2d 415 (3rd Dept. 1985). In this regard, it is important to consider the capital gains treatment of property transfers incident to a divorce.

Under Internal Revenue Code Section 1041, as a general rule, transfers between spouses or transfers between former spouses incident to a divorce do not result in a taxable gain or loss; it is treated as a gift. To be incident to a divorce, the transfer must occur within one year of the cessation of the marriage or be related to the cessation of the marriage.

Hartog v. Hartog, 85 N.Y.2d 36, 623 N.Y.S.2d 537, 647 N.E.2d 749 (1995) partially modified some of the established case law on consideration of tax consequences. The rule has been that, while tax consequences should be considered, the court need not consider them if the parties do not furnish relevant information on that subject. This is grounded in the practical realization that it is too much to expect the court to consider tax consequences in the absence of evidence as to what those tax consequences would be. The income tax laws are voluminous and complex and it is unfair to expect the court to speculate as to the applicability of various provisions, and the taxes involved, without information from the parties. Thus, as a general rule, if the parties fail to submit evidence as to tax impacts, the parties have waived any right to have the court consider the issue of taxes. See Brennan v. Brennan, 124 A.D.2d 410, 507 N.Y.S.2d 507 (3rd Dept. 1986); Farsace v. Farsace, 97 A.D.2d 951, 486 N.Y.S.2d 751 (4th Dept. 1983). Likewise, if the evidence offered is vague, speculative, unreliable, imprecise or hopelessly confusing, it need not be considered. Schanback v. Schanback, 159 A.D.2d 498, 552 N.Y.S.2d 370 (2nd Dept. 1990), leave to appeal denied, 76 N.Y.2d 703, 559 N.Y.S.2d 982, 559 N.E.2d 676.

In Hartog, the husband testified that he intended to sell off his business interests and live off the interest on the proceeds. He argued that the court should hold the wife responsible for the payment of a share of the capital gains taxes that would be imposed upon the sale of his business interests. The trial court declined to hold the wife responsible for any part of those taxes, ruling that the husband had failed to provide any information as to what the amount of the taxes might be. The appellate division reversed the trial court on this point, declaring that since virtually all of the marital assets were nonliquid and there was no provision for the wife’s share to be distributed, a good portion of the marital assets must be sold in order for the husband to satisfy the distributive award. The court held that it was only fair that the tax liability be borne in the same proportion as each party’s share of the property sold. If the rule were otherwise, the husband’s share would be less than the wife’s since his share would be reduced by the taxes paid on both shares. 194 A.D.2d 286, 294-295, 605 N.Y.S.2d 749, 754 (1st Dept. 1993). While the Court of Appeals modified the first department’s decision inHartog in other respects, it sustained the tax ruling. It held that it was not an abuse of discretion to provide that her distributive award be reduced by her equitable share of the tax liability. 85 N.Y.2d at 52, 623 N.Y.S.2d at 546.

The result in Hartog is fair. Since it was clear that the husband would be selling off property and turning a portion of the proceeds over to the wife, it was fair to charge her with the taxes on her portion. Otherwise, instead of each party receiving half of the marital property, the taxes on all of the property would be paid by the husband only. Since the property was titled in the husband, and the gains would be reported by him, it was appropriate to offset the wife’s award by the amount of taxes on her share actually paid by the husband. Requiring expert testimony as to what the taxes would be, in this context, is unnecessary. Since the amount of the taxes will be established with certainty upon a sale, a battle between experts as to their own opinions as to the taxes would not necessarily be probative or even helpful.

The Hartog rule is not iron clad; the Court of Appeals held only that no abuse of discretion was involved. This is far different than holding that taxes must always be deducted. Nevertheless, the trend of authority has been, where assets are to be sold, to have the parties share in the liabilities, including taxes, attributable to the sale in the same proportion as they participate in the profits.

Hartog is of major significance in the trial of equitable-distribution matters. Where a client proffers testimony that property is to be sold, and a sale is ordered, expert testimony as to the tax impact is not required. This will save trial time, as well as the expense of obtaining accountant testimony. Yet, trial counsel must take care: if the property is not going to be sold and an in-kind distribution is ordered, then the absence of testimony as to tax consequences may be fatal to the consideration of them by the trial court.

Hartog does not come into play in cases involving an in-kind distribution. For example, where the custodial parent is to receive title to the marital residence and sale is not ordered, capital-gains considerations would require testimony as to what the gains might be. The absence of testimony as to tax consequences may be fatal to the consideration of them by the trial court. This point is borne out by Kudela v. Kudela, 277 A.D.2d 1015, 716 N.Y.S.2d 231 (4th Dept. 2000), where the court held that the trial court was not required to consider the tax consequences of a sale of the husband’s business property where there was no evidence that such property would have to be sold. See Unger-Matusik v. Matusik, 276 A.D.2d 936, 715 N.Y.S.2d 449 (3rd Dept. 2000) (it is not error to direct that any capital gains tax be paid out of funds escrowed from sale of property, where the husband did not request such relief at trial, the precise amount of any tax liability was unknown, and the husband had represented that there would not be any significant tax liability).

Likewise, if a spouse is to retain a business, without selling, it would take expert testimony to determine what the capital taxes upon a sale might be. Also, if such testimony is not reliable, is speculative, or is confusing, the court may disregard it.

What made the difference in Hartog was that the capital-gains taxes were an inevitable consequence of the judgment. It is often said that only two things are inevitable: death and taxes. Ironically, Mr. Hartog died shortly after the court of appeals decision. As a result of his death, a sale of his assets by his estate will not generate capital gains taxes, as the estate receives a stepped-up basis. Since no capital-gains taxes will be incurred, the wife did not have to share in them. See Hartog v. Hartog, N.Y.L.J., August 4, 1995, p. 23, col. 1 (Sup.Ct. N.Y. County).

With respect to sales of principal residences occurring on or after May 7, 1997, all gain up to $250,000 will be excluded from gross income, provided that, during at least two of the five years prior to date of the sale, the property was owned or used by the taxpayer as the taxpayer’s principal residence. I.R.C. § 121(a), (b)(1). If the residence is owned by a husband and wife who file a joint return for the tax year in which the sale takes place, the $250,000 exclusion is increased to $500,000, provided that either spouse meets the ownership requirement of two years out of the last five years and both spouses meet the use requirement of two years out of the last five years. I.R.C. § 121(a), (b)(2).

An individual will still be treated as using the property during a period of ownership during which his or her spouse is granted use of the property under a divorce or separation instrument. I.R.C. § 121(d)(3)(b). Thus, if the wife is granted temporary exclusive occupancy of the marital residence during the pendency of the action, and at the conclusion of the action the residence is ordered sold and the proceeds divided, the husband may still claim the exclusion under the state, even though he had ceased using the property as his principal residence.

The statute also provides that, where a spouse transfers title of the residence to the other spouse, incident to divorce, the period that the transferee owns the property, for capital gains tax purposes, will include the period that the transferor owned the property. I.R.C. § 121(d)(3)(A). This means that if the husband had sole title to the property for three years and then transferred title to the wife, who then becomes responsible for the capital gain, the wife may claim the husband’s period of ownership and thus qualify for the exclusion of gain under the revised statute.

Note that the gain exclusion provisions apply to only one sale or exchange of property every two years. I.R.C. § 121(c).

The courts may apportion tax liabilities as between the parties. Thus, the court may direct that certain tax liabilities be paid by one party, rather than the other, or apportion the responsibility between the parties. See Capasso v. Capasso, 129 A.D.2d 267, 517 N.Y.S.2d 952 (1st Dept. 1987), modified, 135 A.D.2d 469, 529 N.Y.S.2d 460, leave to appeal denied, 70 N.Y.2d 988, 526 N.Y.S.2d 429, 521 N.E.2d 436, (wife held equally responsible for financial liability arising out of tax manipulations where she received benefit from scheme but held not responsible for fine imposed on husband after his criminal conviction for income tax violation); Kaltenbach v. Kaltenbach, 121 A.D.2d 689, 504 N.Y.S.2d 452 (2nd Dept. 1986), leave to appeal denied, 68 N.Y.2d 611, 508 N.Y.S.2d 1028, 501 N.E.2d 601 (joint income tax liabilities to be paid out of proceeds from sale of marital residence). Where the parties shared equally in the benefits derived from the failure to pay proper income taxes during the marriage, both parties should be required to equally share the tax liabilities. Conway v. Conway, 29 A.D.3d 725, 815 N.Y.S.2d 233 (2nd Dept. 2006). In addition, note that in Costello v. Costello, 304 A.D.2d 517, 757 N.Y.S.2d 588 (2nd Dept. 2003), the court ordered that the husband pay any taxes, interest, and penalties due in connection with the parties’ failure to timely file a joint tax return, where it was found that the husband was the party who made the financial decisions regarding that return, he earned virtually all of the parties’ income that year, and had met and negotiated with the Internal Revenue Service on behalf of both parties without notifying the wife he was doing so.

Consideration of tax consequences is important so that the court has a proper understanding of the net effect that its determination will have on the parties. The court should consider structuring its distributive plan in a fashion that minimizes the adverse tax consequences to the parties. To the extent that the court can avoid incurring additional tax liabilities on the parties, the court can preserve the marital assets for the benefit of both parties. The fewer dollars that must be paid to the taxing authorities, the more dollars are available for distribution to the parties. Thus, in Nolan v. Nolan, 107 A.D.2d 190, 486 N.Y.S.2d 415 (3rd Dept. 1985), it was held proper to provide for a distributive award, payable in installments, rather than direct a liquidation of assets which would have triggered severe tax consequences.

Where a party, after the valuation date, makes a tax payment towards tax obligations owed by both parties, the paying party is entitled to a credit for the payment. Shahidi v. Shahidi, 129 A.D.2d 627, 514 N.Y.S.2d 259 (1st Dept. 1987).

Factor 12--The court is to consider the wasteful dissipation of assets by either spouse. This factor, too, was an express factor in maintenance and, prior to a 1986 amendment, was considered by the courts on a discretionary basis under Former Factor 10 (now Factor 14). However, expenditures which were agreed to and enjoyed by both parties but which in hindsight may seem improvident to parties who no longer can reach rational agreement, should not be held against one party as a waste of assets. SeeWillis v. Willis, 107 A.D.2d 867, 484 N.Y.S.2d 309 (3rd Dept. 1985). This subject is further considered in Practice Commentary C236B:27, infra.

Factor 13--The court is to consider, as a statutory factor in equitable distribution, any transfer or encumbrance made in contemplation of a marriage without fair consideration. This factor deals with the problem of a party who seeks to place assets out of his or her control in contemplation of an action in which equitable distribution will be made. For the court to actually set aside the transfer, the court would need jurisdiction over the transferee and a proper basis for doing so, such as proof satisfying the requirements of the Debtor and Creditor Law. Where the transfer cannot be undone, this new statutory factor allows the court to award a greater share of any remaining property to the other spouse who has been victimized. This subject is further considered in Practice Commentary C236B:27, infra.

Barriers to Remarriage--DRL Section 253 seeks to provide a remedy for the situation where a Jewish husband refuses to sign religious documents needed for a religious divorce. DRL 253 is designed to force such husbands into voluntarily agreeing to remove “barriers to remarriage” or else be precluded from obtaining a civil divorce judgement. For discussion of the workings of the statute, see the Practice Commentaries accompanying DRL § 253.

In 1992, the Legislature added paragraph (h) to subdivision 5 which requires the court to consider, where appropriate, the effect that a barrier to remarriage would have on the various legislative factors. L.1992, ch. 415 (eff. August 16, 1992). While the barrier to remarriage issue is not a direct legislative factor on equitable distribution, it is to be considered as a factor which may influence the statutory factors. While the barrier to remarriage issue is not a direct legislative factor on equitable distribution, it is to be considered as a factor which may influence the statutory factors. In Schwartz v. Schwartz, 235 A.D.2d 468, 652 N.Y.S.2d 616 (2nd Dept. 1997), where the husband withheld delivery of the religious divorce in order to extract an economic concession from the wife, it was held that the husband had forfeited any right to a distributive award from the wife on account of her separate property. In Sieger v. Sieger, 37 A.D.3d 585, 829 N.Y.S.2d 649 (2nd Dept. 2007), the wife was held not to be entitled to oppose a civil divorce where the husband, though having obtained a document from the rabbinical court permitting him to remarry without first obtaining the Jewish religious divorce (a “get”), was willing to give the wife a “get” but the wife was unwilling to accept it absent certain conditions.
 
C236B:26: Valuation Dates and Proof

One of the crucial equitable distribution questions is the date as of which marital property is to be valued. Where marital property has increased or decreased in value during the pendency of the action, much may turn on the valuation date selected by the court. This area of the law has been fraught with confusion. While marital property ceases, by definition, to be acquired once a matrimonial action is commenced, the statute does not mandate that property be valued as of the time of the commencement of the action. Thus, an important distinction must be made between dates used for classification and dates used for valuation. See Pickard v. Pickard, 33 A.D.3d 202, 820 N.Y.S.2d 547 (1st Dept. 2006), appeal dismissed, 7 N.Y.3d 897, 826 N.Y.S.2d 603, 860 N.E.2d 66 (2006) (securities, which were retirement accounts, should be valued as of time of trial as such assets are passive).

The issue of an appropriate valuation date for marital assets is a distinct and separate issue from whether the asset in question is marital at all. The date that marital assets cease to accrue as such can be, but need not be, the same date that some or all of the assets are valued. Iwanow v. Iwanow, 39 A.D.3d 471, 834 N.Y.S.2d 247 (2nd Dept. 2007).

With regard to pension rights, the problem is one of classification. Pension rights are determined as of the date of commencement of the action, since rights earned subsequently cannot be considered marital property. Majauskas v. Majauskas, 61 N.Y.2d 481, 474 N.Y.S.2d 699, 463 N.E.2d 15 (1984); Willis v. Willis, 107 A.D.2d 867, 484 N.Y.S.2d 309 (3rd Dept. 1985). While pensions must be valued as of the time of commencement, passive increases in the value of the marital portion of the pension, such as increases attributable to interest, are marital property subject to distribution. Campbell v. Campbell, 280 A.D.2d 837, 720 N.Y.S.2d 628 (3rd Dept. 2001).

In determining the issues of equitable distribution of pensions, the court and the parties should be sensitive to the consequences of delay between the determination and the actual implementation of the pension distribution. It is possible, if not likely, that the value of the plan, where it is invested in stock, may fluctuate in value. Where it is intended that the parties should have equal gain from market increases, or equally share market losses, occurring between the date of decision (or date of a separation agreement) and the date of actual distribution, the decision (or agreement) should clear so specify. Failure to do so may have drastic consequences. In one case, the separation agreement of the parties provided that a stock purchase pension plan would be “evenly divided by the parties, valued as of the date of agreement less any loan thereon currently outstanding.” The question arose, under this language, as to who would bear the loss in value that occurred after the making of the agreement. The court held that the language “valued as of the date of the agreement” merely set forth the date after which payments into the payment would be considered the employed spouse’s separate property and that the agreement called for the asset to be divided equally. Thus, the parties would equally share the loss in value. In reaching this conclusion, the Appellate Division, Fourth Department, overruled the lower court.McCarthy v. McCarthy, 298 A.D.2d 977, 747 N.Y.S.2d 881 (4th Dept. 2002). It would be far more preferable to use clearer language in order to avoid litigation of the question.

As to other property, the selection of a valuation date has been held, for the most part, to be a matter within the discretion of the court, with the choice of date being dependent upon the circumstances presented. The placement of the selection of a valuation date within the discretion of the court is confirmed by DRL § 236(B)(4)(b). Paragraph 4b provides that as soon as practicable after the commencement of a matrimonial action, the court must set the date or dates the parties are to use for valuation of each asset. The valuation date or dates may be anytime from the date of the commencement of the action to the date of trial.

The statute confirms that the court may select any valuation date as long as the date chosen is no sooner than the date the action was commenced and is not later than the date the trial commenced. The same date need not be applied to all assets; different dates may be applied to different assets. The date or dates selected may be a date that has passed, i.e., where the selection is made during pretrial proceedings, the date of the action’s commencement may be used. The date or dates selected may be a date in the future, i.e., where the selection is made during pretrial proceedings, the date may be as far in the future as the date of trial. The date or dates selected may be a date not presently determinable, i.e., the court may fix the date of the commencement of the trial as the valuation date even if the date for the start of trial is not yet set or, if set, may be subject to change.

The valuation date may not be any earlier than the earliest date allowed by the statute, i.e., the date of commencement. Thus, where the parties physically separated prior to the commencement of the action, the date of physical separation may not be used as the valuation date. See Knight v. Knight, 258 A.D.2d 955, 685 N.Y.S.2d 560 (4th Dept. 1999).

The date or dates for valuation should be selected with a view to the facts and circumstances presented by the individual case. The choice of date or dates for valuation should be made in an order of the court.

The difficulty with the statute is that it mandates that the selection of date or dates be made at the earliest possible stage of the case. What the drafters may have contemplated is the selection of a valuation date at the first pretrial conference to be conducted pursuant to 22 N.Y.C.R.R. § 202.16. The purpose behind this requirement is to let the parties know, in advance of trial, the date to be used for valuation purposes so that they might gear their trial preparation accordingly. In the past, there was complaint that a party prepared his or her case on the conviction that one date was to be used and was caught short when the court applied a different date. It may be difficult for the court to make an intelligent selection of valuation dates based solely upon arguments of counsel at a pretrial conference. It is permissible to move, on the basis of affidavits and relevant exhibits, the court for a pretrial order fixing valuation dates. Such a motion has the advantage of at least placing sworn support before the court for the date or dates being urged. Given the fact that, under the individual assignment system, many justices have hundreds of pending cases, a motion may be advisable in the event that a pretrial conference is delayed or is not conducted at all. A formal motion may also be needed where a party disagrees with the valuation date selected and desires to appeal the interlocutory order fixing the date or to preserve the point for review upon appeal from the final judgment. See CPLR 5501(a)(1), 5701. If a party desires to seek appellate review of valuation dates selected by the court following an oral pretrial conference, a formal motion to vacate the order made after the conference would be required. Disputed factual issues may prevent the court from making an appropriate selection prior to trial. See Iwanow v. Iwanow, 39 A.D.3d 471, 834 N.Y.S.2d 247 (2nd Dept. 2007).

Further, where considerable time passes between the designated valuation date and the date of trial, an argument can be presented to the appellate court that the trial court should have updated the appraisals of an asset, such as the marital residence. For example, in Bartek v. Draper, 309 A.D.2d 825, 765 N.Y.S.2d 893 (2nd Dept. 2003), the appellate court held that because of the inordinate length of time that passed between the testimony of an appraiser on March 4, 1999, as to the value of a cooperative apartment and the date the trial closed on June 26, 2000, and the date of decision, February 4, 2002, the apartment should have been reappraised as of June 26, 2000, the last date of testimony.

The statute seems to contemplate that once a date or dates are selected, those dates are binding, even if the judge who presides at trial is not the judge who made the selection. However, the statute should not be narrowly construed but, instead, interpreted in a fashion that is in keeping with its purpose. The purpose of the statute is to avoid surprise at trial as to the date of valuation used. The statute should not be so narrowly read as to strip away from the court the ability to change its mind, and its order, if circumstances have so changed as to affect the choice of valuation date. Surprise may be avoided if the party seeking to use a different date applies for a modification of the order in ample time in advance of trial. If the court believes that a change in dates is in order but that the time for trial is too close, surprise and prejudice could be avoided by coupling the change of date with an adjournment of the trial, or even a continuance, where the trial has actually commenced. The same remedy, a change in date with an adjournment or continuance, should be available where it turns out, on trial or after further pretrial proceedings, that key facts, relied upon by the court in fixing the valuation date, are not accurate or are not substantiated.

The fact that a given date or dates is to be used for valuation purposes should not preclude evidence of the value of a given asset as of a different date and of the reasons why the value of the asset has increased or decreased. Evidence of the original value of the asset, at the time of its acquisition, is always most relevant. Such evidence is vital where the property in question is separate property and the claim is advanced that the nonowner spouse should be awarded an interest in the appreciation of that asset. See DRL § 236 (Part B, subd. 1[d][3]). In that situation, the court must be appraised of the original value and the current value in order to determine the extent of appreciation in value, if any. Even where marital property is involved, whether the property increased or decreased in value and the reasons for any fluctuation in value are important considerations when the court determines to divide the property. The court should look to whether the property has increased or decreased in value due to the conduct of either or both parties in relation to that asset. It should consider whether any increases or decrease have been occasioned solely by economic or market conditions over which the parties had no control. See Conner v. Conner, 97 A.D.2d 88, 468 N.Y.S.2d 482 (2nd Dept. 1983); see also Jolis v. Jolis, 111 Misc. 2d 965, 446 N.Y.S.2d 138 (Sup.Ct. N.Y. County 1981),affirmed, 98 A.D.2d 692, 470 N.Y.S.2d 584 (1st Dept. 1983). Indeed, the conduct of both parties in relation to the property in question is an important factor. Where experts are to testify as to the value of the property, it usually does not add significantly to the fees of the expert to measure the value of the property by several dates, and testimony as to several dates, at different times during the marriage and even during the pendency of the action, will provide the court with a fuller and more complete framework for a fair and just decision.

The parties may stipulate the valuation date to be used by the court and, if they stipulate, their stipulation is binding, at least in the absence of any demonstration that the selected date has caused hardship to a party. Haymes v. Haymes, 298 A.D.2d 117, 748 N.Y.S.2d 542 (1st Dept. 2002), leave to appeal denied, 100 N.Y.2d 509, 766 N.Y.S.2d 163, 798 N.E.2d 347 (2003) (wife held to stipulated use of date-of-commencement to value business property, though prejudgment interest was denied to her, where neither party was to be faulted for the delay in the resolution of the action, which was attributable to litigation over a novel issue).

The courts often disagree as to the question of valuation dates. The Appellate Division, Second Department, has taken the position that the selection of a date for valuation is a matter of discretion, with the trial court having the ability to change the date after it is set if equity so requires. Wegman v. Wegman, 123 A.D.2d 220, 509 N.Y.S.2d 342 (2nd Dept. 1986), opinion amended, 512 N.Y.S.2d 410 (2nd Dept. 1987).

The Appellate Division, Second Department, has also held that, where the marital residence is concerned, the trend has been to employ the date of trial as the valuation date. Wegman v. Wegman, 123 A.D.2d 220, 509 N.Y.S.2d 342 (2nd Dept. 1986), opinion amended, 512 N.Y.S.2d 410 (2nd Dept. 1987). See also Collins v. Donnelly-Collins, 19 A.D.3d 356, 796 N.Y.S.2d 159 (2nd Dept. 2005) (given dramatic increase in value of former marital residence in the three years since the commencement of the divorce action, it was proper to select time of trial as valuation date, though spouse could seek a credit or a greater equitable share to reflect any individual efforts that are proven to have contributed substantially to the increase in value).

The Fourth Department concurs that, as a general rule, the value of the marital residence should be fixed as of the time of trial. Wittig v. Wittig, 258 A.D.2d 883, 685 N.Y.S.2d 342 (4th Dept. 1999) (value decreased from commencement date, time of trial value used in order to prevent a windfall to either party); see also Breese v. Breese, 256 A.D.2d 433, 681 N.Y.S.2d 606 (2nd Dept.1998) (corporation whose only asset was realty); but see Sygrove v. Sygrove, 15 A.D.3d 292, 791 N.Y.S.2d 73 (1st Dept. 2005) (marital residence valued as of date wife transferred title to her mother’s company by deed in lieu of foreclosure, rather than higher time of trial valuation; court valued property as of date of transfer by value set forth in contemporaneous bona fide offer, rather than lower value given for transfer).

Marital fault is not a factor in the selection of a valuation date. Myers v. Myers, 255 A.D.2d 711, 680 N.Y.S.2d 690 (3rd Dept. 1998).

Numerous cases have adopted a guideline for how to choose between valuating as of time of commencement and as of time of trial. See Kosovsky v. Zahl, 257 A.D.2d 522, 684 N.Y.S.2d 524 (1st Dept. 1999). This rule involves looking at the asset involved and determining whether it is an “active” or “passive” asset.

An active asset, according to the cases, should be valued as of time of commencement since any appreciation (or depreciation) in value which occurs thereafter is, by definition, the product of the labors of the active spouse. In contrast, a passive asset should be valued as of time of trial since any increase or decrease in value will occur regardless of the conduct of the parties, and neither party should receive a windfall or be penalized because of valuation changes brought about by outside forces. See Pickard v. Pickard, 33 A.D.3d 202, 820 N.Y.S.2d 547 (1st Dept. 2006), appeal dismissed, 7 N.Y.3d 897, 826 N.Y.S.2d 603, 860 N.E.2d 66 (2006) (securities, which were retirement accounts, should be valued as of time of trial as such assets are passive); Greenwald v. Greenwald, 164 A.D.2d 706, 565 N.Y.S.2d 494 (1st Dept. 1991); Zelnik v. Zelnik, 169 A.D.2d 317, 573 N.Y.S.2d 261 (1st Dept. 1991); Kallins v. Kallins, 170 A.D.2d 436, 565 N.Y.S.2d 227 (2nd Dept. 1991). Further authority for the view that active assets should be valued as of time of commencement of the action is Heine v. Heine, 176 A.D.2d 77, 580 N.Y.S.2d 231 (1st Dept. 1992). Authority for the proposition that where valuation changes are attributable to market conditions, the asset may be considered passive and a more current valuation date utilized may be found in Smerling v. Smerling, 177 A.D.2d 429, 576 N.Y.S.2d 271 (1st Dept. 1991). Yet, it is clear that posttrial changes in value are not to be considered at all. Heine v. Heine, supra.

In Grunfeld v. Grunfeld, 94 N.Y.2d 696, 709 N.Y.S.2d 486, 731 N.E.2d 142 (2000), the Court of Appeals sustained the use of the active/passive test as a guidepost for resolving the issue of valuation date. There, the trial court had valued the husband’s law practice as of the date of the commencement of the action. The husband maintained that this was unfair because the value of the practice declined between the commencement date and the trial date. The Court of Appeals sustained the selection of the valuation date, stating that changes in laws and the loss of clients may have resulted in a loss of profitability, there was ample support for the finding below the law practice had not undergone the type of radical alteration subsequent to the commencement of the action that would warrant a valuation of the practice at the time of trial.

Earlier, in McSparron v. McSparron, 87 N.Y.2d 275, 639 N.Y.S.2d 265, 662 N.E.2d 745 (1995), the Court of Appeals warned that the active/passive distinction should not be turned into an immutable, inflexible rule of law. In McSparron, the Court of Appeals advised that strict reliance should not be placed upon the active/passive distinction, since the active/passive test, while a useful guideline, is not without its flaws. See 87 N.Y.2d at 287, 639 N.Y.S.2d at 272.

In McSparron, during the pendency of appellate proceedings, the wife appeared at a press conference and accused the husband, an attorney employed by the New York State attorney general, of engaging in criminal activity. The purpose of this press conference was to embarrass the incumbent attorney general, who was then campaigning for a different office. As a result of the accusations, the husband was forced to resign from his position and had been unable to find new employment. The appellate division, holding that the husband’s license was not a distributable asset, declined to make any award for its value, thus rendering moot the issue of the wife’s postcommencement conduct. However, the court of appeals overturned the ruling that had excluded the value of the husband’s license from distribution. It then had to grapple with the issue of the wife’s postcommencement conduct.

The Court stated that, under the “active/passive” test, the husband’s law license would be viewed as an “active” asset. Yet, assets being managed by a spouse are labeled active in order to prevent the spouse in control over that asset from manipulating its value. That rationale, said the court, would hardly be applicable to a situation where the nontitled spouse engaged in acts which may have undermined the license’s residual economic value. Thus, the court concluded that “whether the unusual postcommencement events that led to defendant’s job loss should be considered in assessing the residual value of his law license is a question that lies squarely within the trial court’s discretion.” 87 N.Y.2d at 287-288, 639 N.Y.S.2d at 272. The court made it clear that “the timing of these events should not by itself be a legal impediment to such consideration.” 87 N.Y.2d at 288, 639 N.Y.S.2d at 272.

As the Court of Appeals noted in McSparron, one of the objectives of the active/passive test is to protect the nontitled spouse from manipulation of the value of the asset by the titled spouse. One of the other objectives of the test, not stated by the court, is to deny the nontitled spouse a windfall resulting from an increase in the value of the asset due to the postcommencement efforts of the titled spouse, at least where the nontitled spouse did not make any postcommencement contributions. It most certainly is appropriate to permit the court to take into account the efforts of a spouse, titled or nontitled, to destroy or spoil a marital asset.

As the Court of Appeals noted, it is not easy to readily classify assets as active or passive. The active/passive distinction developed in connection with determining whether postmarital appreciation in separate property should be treated as marital property. The courts tended to favor viewing assets as active since that would pull more assets into the marital property category. However, the same broad sweep of property into the active category may not be appropriate in terms of fixing a valuation date. For example, the marital residence is in some ways a passive asset, greatly subject to market fluctuations; the residence can also be viewed as an active asset, with the parties expending funds and efforts on maintaining and improving it. An overly strict use of the active/passive test may lead to undue stress on efforts to categorize the property and less sensitivity to the equities presented by the individual case.

McSparron does not alter the rule that posttrial changes in value are not to be considered. There, the court of appeals held that, upon a remand necessary to determine the value of the husband’s law license, the trial court had discretion to take into account the wife’s posttrial conduct which may have undermined the value of the license. McSparron permitted evidence of that posttrial conduct because, as it turned out, the trial was not over and the case was not concluded. Because the appellate process resulted in a determination that a new hearing was needed on the value of one item of property, evidence of the parties’ conduct, and its impact on value of that item, is relevant, up to the closure of the new hearing.

The Appellate Division, Third Department, appears to have adopted the active/passive test. In Soule v. Soule, 252 A.D.2d 768, 676 N.Y.S.2d 701 (3rd Dept. 1998), the court affirmed the trial court’s use of the time of commencement of the action as the date for valuation of the husband’s stock options. The stock options had appreciated between the commencement date and the trial date as the direct result of the husband’s efforts. In holding that this active asset was properly valued at the commencement date, the Third Department quoted extensively from prior First Department precedent. However, the Third Department did make the point that this rule is not absolute.

The Third Department, in the past, took the general position that valuation should ordinarily be done as of the time of commencement. See, e.g., Nolan v. Nolan, 215 A.D.2d 795, 626 N.Y.S.2d 568 (3rd Dept. 1995). But with Soule and with Homkey-Hawkins v. Hawkins, 42 A.D.3d 725, 839 N.Y.S.2d 849 (3rd Dept. 2007), the Third Department may be moving closer to the other Departments. In Homkey-Hawkins, the court held that it was not an abuse of discretion for the trial court to value real estate at a date closer to the time of trial (rather than a date prior to commencement) where the increase in value over the two dates was attributable solely to market factors.

Even the original time-of-commencement rule of the Third Department was not applied in situations in which the rule would produce results that are “patently inequitable.” For example, an exception to the time-of-commencement rule was made in Butler v. Butler, 256 A.D.2d 1041, 683 N.Y.S.2d 603 (3rd Dept. 1998). There, the husband filed for bankruptcy about one year after the commencement of the action. There was no showing that the husband’s filing was influenced by a desire to use the bankruptcy to avoid the financial consequences of the divorce. Rather, the evidence showed that the husband was in financial trouble prior to the commencement of the action, having incurred substantial credit card debt in order to keep his business afloat. The husband was forced in the bankruptcy proceeding to sell all of the business assets at auction and the proceeds went to satisfy the business debts. On these facts, the court held that it would be inequitable to utilize income, revenue, and asset valuations as of the commencement date. Indeed, to allow the use of the commencement date would encourage a spouse to the matrimonial courthouse before the other spouse can get to the bankruptcy courthouse. Instead, the court, as occurred in Butler, should look to the economic realities, not just predicate a distribution plan based upon which party filed first. For another example of a situation where the Third Department invoked a time of trial rule, because use of the time of commencement valuation was viewed as “patently equitable,” see Patelunas v. Patelunas, 139 A.D.2d 883, 527 N.Y.S.2d 325 (3rd Dept. 1988).

Bank accounts are generally viewed as active assets and are valued as of time of commencement. Naimollah v. De Ugarte, 18 A.D.3d 268, 795 N.Y.S.2d 525 (1st Dept. 2005) (stock brokerage account, though managed by broker, viewed as active asset and capital losses responsibility of titled spouse, but losses attributable to passive decline in market value may be charged to both spouses; withdrawals made from the account to pay for school fees, for separate tax payments and taxes on titled spouse’s condominium should not be deducted from account for equitable distribution purposes).

Where business or professional practices are concerned, the courts generally view them as active assets and use a time-of-commencement valuation. See, e.g., Daniel v. Friedman, 22 A.D.3d 707, 803 N.Y.S.2d 129 (2nd Dept. 2005) (proper to value husband’s business as of time of commencement; while economic downturn between commencement and trial of action had impacted value, the evidence at trial showed that the value had rebounded significantly and there were signs of potential positive growth for the future); Harmon v. Harmon, 173 A.D.2d 98, 578 N.Y.S.2d 897 (1st Dept. 1992); White v. White, 204 A.D.2d 825, 611 N.Y.S.2d 951 (3rd Dept. 1994); Wegman v. Wegman, 123 A.D.2d 220, 509 N.Y.S.2d 342 (2nd Dept. 1986), opinion amended, 512 N.Y.S.2d 410 (2nd Dept. 1987); but see Naimollah v. De Ugarte, 18 A.D.3d 268, 795 N.Y.S.2d 525 (1st Dept. 2005) (where wife’s business suffered losses due to adverse forces beyond her control, proper to value the business as of time of trial); Weissman v. Weissman, 8 A.D.3d 264, 777 N.Y.S.2d 679 (2nd Dept. 2004) (where husband’s individual medical practice was merged into a group practice five months after the commencement of the action, the trial court did not abuse its discretion in selecting date of merger as the valuation date, rather than the commencement date). In Mahoney-Buntzman v. Buntzman, 12 N.Y.3d 415, 881 N.Y.S.2d 369, 909 N.E.2d 62 (2009), the Court of Appeals upheld as a proper exercise of discretion the valuation of the husband’s business stock and stock options as of the date of trial.

In Wegman v. Wegman, 123 A.D.2d 220, 509 N.Y.S.2d 342 (2nd Dept.1986), opinion amended, 512 N.Y.S.2d 410 (2nd Dept. 1987), the Appellate Division directed that the valuation of the husband’s business interests be as of a date as close to the date of trial as possible.

A leading exponent of the active/passive test is Greenwald v. Greenwald, 164 A.D.2d 706, 565 N.Y.S.2d 494 (1st Dept. 1991), a case which involved the husband’s rights in certain securities accounts. The Appellate Division termed these accounts to be active and ordered them valued as of time of commencement. The husband maintained that the accounts were active because he managed them. The wife claimed they were passive because, at trial, the husband appeared unfamiliar with the account statements and he was receiving assistance from his stock broker. The court found that the husband alone made the decisions on at least one of the accounts. Yet, more importantly, it held that, even if a spouse acts through an agent, the decisions are still those of the titled spouse and he or she alone should stand to gain, or lose, from those decisions.

In Zelnik v. Zelnik, 169 A.D.2d 317, 573 N.Y.S.2d 261 (1st Dept. 1991), the asset involved was the funds received by the husband from the sale of his stock in his former corporate employer. The court found that the stock had increased in value due to the fact that a third party had repurchased a license agreement from the employer. This was a market fluctuation, not an increase due to the husband’s efforts, and the stock was held to be a passive asset.

In Kallins v. Kallins, 170 A.D.2d 436, 565 N.Y.S.2d 227 (2nd Dept. 1991), the court valued the husband’s business, which was an item of separate property, as of the time of the commencement of the action.

In Maharam v. Maharam, 245 A.D.2d 94, 666 N.Y.S.2d 129 (1st Dept. 1997), the Appellate Division held that it was not an abuse of discretion for the trial court to use the date of commencement of the action as the valuation date, though an earlier pretrial ruling by a different judge fixed a somewhat later valuation date. The difficulty is, however, that a party may be prejudiced by having relied upon the pretrial ruling, the very sort of prejudice that the statute was designed to avoid. Where a party complains that a change in date may cause surprise or prejudice, the court should be willing to grant an adjournment or a continuance to enable the litigants to properly address the new valuation date fixed by the court.

In Filkins v. Filkins, 303 A.D.2d 934, 757 N.Y.S.2d 665 (4th Dept. 2003), the Fourth Department, held it error to value a stock account as of the time of commencement of the action where the value of account declined drastically between the time of commencement and the time of trial due to market forces. The effect of the trial court’s ruling was to require a husband to pay a wife half of the previous, substantially higher, value, in effect making him a guarantor of the stock market. The appellate division sensibly ruled that both parties, not just one of them, should bear the risk of market changes, at least in the absence of any showing that one party was more responsible than the other for managing the account or making investment decisions.

Where the husband had a securities account and actively traded the stocks in the account, the account was deemed to be an “active” asset, to be valued as of commencement date of the action, even though the parties had agreed that the husband would not make any withdrawals from the account during the pendency of the action. Ferraioli v. Ferraioli, 295 A.D.2d 268, 744 N.Y.S.2d 34 (1st Dept. 2002). Similarly, where parties agreed to divide stock purchase plan evenly, “valued as of date of agreement less any loan thereon currently outstanding,” and value decreased due to market factors between making of agreement and distribution, the trial court should have required parties to divide asset “evenly,” rather than require husband to absorb loss out of his share. McCarthy v. McCarthy, 298 A.D.2d 977, 747 N.Y.S.2d 881 (4th Dept. 2002). However, in Blenk v. Blenk, 6 A.D.3d 283, 775 N.Y.S.2d 294 (1st Dept. 2004), it was held proper to value investment assets as of end of trial where the accounts declined due to market factors and due to the husband’s withdrawals to pay for necessities, not other investment options.

Where valuation is done as of time of commencement, the courts have differed as to whether prejudgment interest should be awarded. See Selinger v. Selinger, 232 A.D.2d 471, 648 N.Y.S.2d 470 (2nd Dept. 1996); Kessler v. Kessler, 212 A.D.2d 1038, 623 N.Y.S.2d 435 (4th Dept. 1995); Ritz v. Ritz, 166 A.D.2d 568, 560 N.Y.S.2d 853 (2nd Dept. 1990); Schanback v. Schanback, 159 A.D.2d 498, 552 N.Y.S.2d 370 (2nd Dept. 1990); Largiader v. Largiader, 151 A.D.2d 724, 542 N.Y.S.2d 789 (2nd Dept. 1989). Thus, for example, in Chasin v. Chasin, 182 A.D.2d 862, 582 N.Y.S.2d 512 (3rd Dept. 1992), it was held error to grant prejudgment interest where valuation was as of time of trial, both parties shared in the appreciation, and the action moved promptly to trial without delay chargeable to one party or the other.

Maharam v. Maharam, 245 A.D.2d 94, 666 N.Y.S.2d 129 (1st Dept. 1997) also speaks to the issue of interest, a material point given the lengthy period of time that it took to bring the action to trial on the economic issues. The case was over a decade old and it appeared that both parties contributed to the lengthy delay. The Appellate Division held that interest should be granted on a substantial equitable distribution award from the date of an interlocutory divorce judgment entered in 1984. The court declined to use the somewhat earlier date that the action was commenced, even though the commencement date was used as the valuation date. The court, aware that the interest would be substantial, noted that the interest represented a charge to the husband for the use of the wife’s money, rather than a penalty for fault. As a consequence, the issue is not which party was responsible, or was more responsible, for the delay. The issue is whether, under the circumstances, the party entitled to a distributive award is also entitled to payment for the use made of the funds by the payor spouse during the time that the action was pending.

The First Department has since clarified its view by holding that an award of predecision interest is discretionary. In the case before the court, the first department held that, on the facts, an award of interest on account of the wife’s share of business property would be duplicative where the value of the asset was calculated on income capitalization method. Haymes v. Haymes, 298 A.D.2d 117, 748 N.Y.S.2d 542 (1st Dept. 2002), leave to appeal denied, 100 N.Y.2d 509, 766 N.Y.S.2d 163, 798 N.E.2d 347 (2003). Haymes suggests that prejudgment interest is generally to be awarded where joint income is generated by a principal sum or where the misconduct of one party deprives the other of the use of property. Prejudgment interest is to be denied where business property is valued by the income capitalization approach since, under that approach, prospective income is considered in establishing the property’s present value.

Interest from the valuation date was awarded in Judson v. Judson, 255 A.D.2d 656, 679 N.Y.S.2d 465 (3rd Dept. 1998). See also Gober v. Gober, 4 A.D.3d 175, 772 N.Y.S.2d 32 (1st Dept. 2004) (where a trial court awarded the wife a distributive cash award to be paid out over seven years, the wife was entitled to interest on unpaid balances since, until the husband had made full payment, he was using the wife’s money for which he should be compelled to pay interest).

Interest from decision to judgment and on the judgment is mandatory, not discretionary. Haymes v. Haymes, 298 A.D.2d 117, 748 N.Y.S.2d 542 (1st Dept. 2002), leave to appeal denied, 100 N.Y.2d 509, 766 N.Y.S.2d 163, 798 N.E.2d 347 (2003). Postjudgment interest should be awarded on a distributive award payable over a period of time. See Morton v. Morton, 130 A.D.2d 558, 515 N.Y.S.2d 499 (2nd Dept. 1987).

CPLR 5001(a) provides that in actions of an equitable nature, the awarding of interest and the rate and date from which interest is computed are matters to be decided by the court in its discretion. In Selinger v. Selinger, 250 A.D.2d 752, 672 N.Y.S.2d 913 (2nd Dept. 1998), the court held, citing CPLR 5001(a), that the court has the discretion to set the rate of prejudgment interest in a matrimonial action. In Selinger, the husband had transferred stock to the wife pursuant to a divorce judgment. Thereafter, the judgment was modified on appeal so as to direct the award of prejudgment interest. The husband contended on a subsequent appeal that the trial court’s use of the statutory nine percent interest rate was inappropriate because the stock that he had transferred to the wife had increased in value. This argument was undone, in large measure, by the fact that the husband, in submitting an amended judgment to the trial court, had likewise proposed to use the nine percent interest rate. Additionally, as the court noted, the wife was entitled to interest from the commencement of the action to the entry of judgment, while the husband did not make the transfer until after the original judgment was entered. The court pointed out that, when the husband submitted his proposed amended judgment, the husband knew that the stock had increased in value and failed to raise any complaint. Thus, it concluded that the husband could not be heard to seek a modification of the interest rate merely because, in hindsight, he believed that a lower rate of interest would be more advantageous to him.

Further authority for the proposition that the trial court may set a lower rate of interest on a distributive award payable in installments is Hamroff v. Hamroff, 35 A.D.3d 365, 826 N.Y.S.2d 389 (2nd Dept. 2006) (interest fixed at 3% on distributive award to be paid over seven years). See also Dewitt v. Sheiness, 42 A.D.3d 776, 840 N.Y.S.2d 208 (3rd Dept. 2007) (not abuse of discretion to order equitable distribution award paid in three yearly installments without interest; only marital property of value was improvement made to husband’s home and he lacked liquid assets and had only a limited income); Schwartz v. Schwartz, 54 A.D.3d 400, 864 N.Y.S.2d 35 (2nd Dept. 2008) (not abuse of discretion to deny wife prejudgment interest on her share of value of husband’s interest in law firm where there was no evidence of misconduct by husband that deprived her of her use or share of marital property).

Interest on a judgment is calculated at the statutory rate, not at the prime or other rate. Unless there is a special statutory exception, interest on a judgment is to accrue at the general statutory rate of 9%. CPLR 5004; Verdrager v. Verdrager, 230 A.D.2d 786, 646 N.Y.S.2d 185 (2nd Dept. 1996).

Attention is directed to the Court of Appeals’ decision in Amodio v. Amodio, 70 N.Y.2d 5, 516 N.Y.S.2d 923, 509 N.E.2d 936 (1987), dealing with the valuation of a close corporation. There, the Court of Appeals held that it is appropriate to consider such factors as the nature and history of the business, its particular economic outlook and that of the industry generally, the book value of the stock and the financial condition of the business, the company’s earning capacity, the goodwill and other intangible assets, other sales of the same stock, and the market price of stock of comparable businesses. The Court of Appeals also stated that capitalization of earnings is another appropriate valuation method. The court ruled, however, that the provisions of a partnership or stockholder’s agreement are not conclusive but that any restriction on the sale of the business interest imposed by such agreement must be considered in placing a value on the interest.

In valuing a business, it may be appropriate, where supported by expert testimony, to discount the value of a minority interest to reflect both decreased marketability and lack of control. Haymes v. Haymes, 298 A.D.2d 117, 748 N.Y.S.2d 542 (1st Dept. 2002), leave to appeal denied, 100 N.Y.2d 509, 766 N.Y.S.2d 163, 798 N.E.2d 347 (2003). The discount for marketability affects only the good will component of the valuation; it does not impact the valuation of the tangible assets. Wagner v. Dunetz, 299 A.D.2d 347, 749 N.Y.S.2d 545 (2nd Dept. 2002).

The court has inherent authority to appoint its own experts on the issues of equitable distribution, with the cost to be apportioned between the parties. Zirinsky v. Zirinsky, 138 A.D.2d 43, 529 N.Y.S.2d 298 (1st Dept. 1988); see 22 N.Y.C.R.R. § 202.18 (court rule authorizing court in matrimonial actions to appoint experts in both custody and equitable distribution matters). Thus, the court may appoint an independent accountant to audit the financial records of a closely held corporation owned by a spouse or a member of a spouse’s family. Pechman v. Pechman, 303 A.D.2d 479, 757 N.Y.S.2d 56 (2nd Dept. 2003). In Pechman, the court sustained the appointment of an auditor where the husband, whose family corporation was the subject of the audit, had been less than forthright concerning his income and finances, the corporation’s accountant had been instructed, shortly after the commencement of the action, to amend the tax returns to show that the husband no longer had a half interest in the property, and the personal finances of the husband and other corporate officers were so commingled with that of the corporation that the value of their income and benefits could not be delineated without a complete audit. See also Gaglio v. Molnar-Gaglio, 300 A.D.2d 934, 753 N.Y.S.2d 185 (3rd Dept. 2002) (sustaining use of discretionary cash-flow analysis to value husband’s businesses where wife’s expert was not given numerous documents and thus could not resolve numerous inconsistencies and what appeared to be substantial underreporting of cash flow available to husband); Ivani v. Ivani, 303 A.D.2d 639, 757 N.Y.S.2d 89 (2nd Dept. 2003).

The report of a court appointed expert must be furnished to the parties, received in evidence, and the expert made available for cross examination. It is reversible error for the expert to report directly to the court, without the report being made available to the parties and properly received in evidence. See Samuelsen v. Samuelsen, 124 A.D.2d 650, 508 N.Y.S.2d 36 (2nd Dept. 1986).

Where only one party produces an expert, and the court finds the conclusions of that expert to be flawed, the trial court should have appointed another expert and directed further proceedings to obtain a more accurate appraisal. Pickard v. Pickard, 33 A.D.3d 202, 820 N.Y.S.2d 547 (1st Dept. 2006), appeal dismissed, 7 N.Y.3d 897, 826 N.Y.S.2d 603, 860 N.E.2d 66 (2006).

Proof of valuation has presented difficulties. Where proof of valuation requires professional, business, or scientific knowledge, proof must generally include expert opinion. The weight of expert testimony, where admissible, is for the trier of fact. Wilbur v. Wilbur, 116 A.D.2d 953, 498 N.Y.S.2d 525 (3rd Dept. 1986).

Experts can be expensive and there has been some tendency to relax the evidentiary rules on lay opinion in the equitable distribution context. For example, it was held proper to allow a spouse to testify as to her estimate of the present value of the household furnishings and equipment, where she was familiar with the cost and condition of those items. Of course, the estimates given can be challenged by cross-examination and by offering opposing testimony, and the weight to be given the testimony, though admissible, is within the discretion of the trial court. Fassett v. Fassett, 101 A.D.2d 604, 475 N.Y.S.2d 154 (3rd Dept.1984).

The parties may stipulate to have the appraisal done by an agreed upon expert or to have the court appoint one and be bound by the evaluation made by that appraiser. Such agreements will be enforced unless it can be shown that the agreement was the product of fraud, overreaching or duress. See Perito v. Perito, 135 A.D.2d 623, 522 N.Y.S.2d 200 (2nd Dept. 1987). There is also no reason why the parties may not make a more cautious stipulation: agreeing to a joint appraisal, but reserving the right to call in other appraisers if there is disagreement with the conclusions of the agreed upon appraiser.

One possible solution to the difficulty in valuing an asset is to order it sold or to provide for how proceeds of a sale are to distributed when, as and if the property is sold. While it is one thing for the court to order an immediate sale of an asset, it is quite another to permit a sale to be deferred for an indefinite period of time. Where the asset in question consists of the right to possible future fees that a party might earn as, in effect, dividends or appreciation on marital property, it was permissible to direct that the fees be divided when received. Silverman v. Silverman, 304 A.D.2d 41, 756 N.Y.S.2d 14 (1st Dept. 2003). However, where the asset in question consisted of a minority interest in a holding company which owned residential apartments, it was held error to direct that the asset be divided “if, as and when” the individual apartments were sold; there was no reason why the present value of the interest in the holding company could not be ascertained. Pickard v. Pickard, 33 A.D.3d 202, 820 N.Y.S.2d 547 (1st Dept. 2006), appeal dismissed, 7 N.Y.3d 897, 826 N.Y.S.2d 603, 860 N.E.2d 66 (2006).
 
C236B:27: Equitable Distribution and Marital and Economic Fault

Original equitable distribution Factor 10, now recast as Factor 14, permits the court, in determining equitable distribution, to consider “any other factor which the court shall expressly find to be just and proper.”

The principal reason for the existence of this factor is the Legislature’s decision to refrain from expressly including or excluding marital fault from the determination of equitable distribution. Fault is expressly excluded from consideration in the determination of child support. DRL § 236, Part B, subd. 7(a). However, fault was not generally regarded as an appropriate factor in a child support determination under prior law. While the first drafts of the equitable distribution legislation expressly ruled out marital fault as a consideration in property distribution, that exclusion was omitted during the legislative process.

The Court of Appeals has held that, ordinarily, marital fault should not be a factor in equitable distribution. O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 489 N.E.2d 712 (1985). The Court ruled that consideration of marital fault is inconsistent with the underlying statutory assumption that marriage is, in part, an economic partnership, with each of the spouses being entitled to a fair share of the marital estate. The Court also reasoned that it may be difficult to assign fault and introduction of the issue would involve the courts in time-consuming procedural maneuvers relating to collateral issues. In reaching this conclusion, the Court of Appeals relied upon the decision of the Second Department in Blickstein v. Blickstein, 99 A.D.2d 287, 472 N.Y.S.2d 110 (2nd Dept. 1984) and upon several other appellate cases which adopted it. See, e.g., McMahan v. McMahan, 100 A.D.2d 826, 474 N.Y.S.2d 974 (1st Dept. 1984); Stevens v. Stevens, 107 A.D.2d 987, 484 N.Y.S.2d 708 (3rd Dept. 1985); Pacifico v. Pacifico, 101 A.D.2d 709, 475 N.Y.S.2d 952 (4th Dept. 1984).

In Blickstein, the trial court awarded all marital property to the wife due to the marital fault of the husband. Had he not been at fault, said the trial court, he would have received 40% of the marital property. On appeal, the Appellate Division concluded that fault was improperly considered and directed that the 60/40 split be implemented. The Blickstein court, in reasoning later accepted by the Court of Appeals in O’Brien, stated that the underlying theory behind equitable distribution is that each party has made contributions to the marital partnership and, upon dissolution, each should be entitled to his or her fair share of the marital estate. Further, the Blickstein court acknowledged that fault may be difficult to evaluate and, in the last analysis, be traceable to the conduct of both parties.

As the New York courts have now recognized, marriage is an intricate relationship. Fault, a legal term used as shorthand for conduct which gives rise to a legal basis for terminating a marriage, may not always serve as a reliable indicator of which party was truly responsible for the break-up of the marriage. The presumably innocent spouse may have committed acts which, while not legally cognizable, stimulated or fostered the environment in which the legally cognizable fault was committed. The fault may even have been occasioned by a hostile or emotionally charged atmosphere which existed because of incompatible temperaments. Or, indeed, the fault may have been committed to escape or ventilate frustration built up within the marriage over time. Fault deals in absolutes; in blacks and whites. Reality usually comes in shades of grey. Furthermore, if legally cognizable fault is committed, the statutory remedy is the granting of marital status relief, i.e., divorce. It could be punitive, however, to deny the offending spouse a just share of the marital estate when the marriage is terminated. To include fault as a factor could deny the reality of marriage as an economic partnership. If it is a partnership, partnership property should be apportioned in accordance with partnership contributions. Fault is, however, a factor where the conduct is extreme.

The New York cases, such as O’Brien and Blickstein, hold that marital fault may be considered in egregious cases which shock the conscience of the court. This exception is to be applied only in the extreme case. A New York example of such a case, though it was decided before Blickstein, is Wenzel v. Wenzel, 122 Misc.2d 1001, 472 N.Y.S.2d 830 (Sup.Ct. Suffolk County 1984). There, the husband, without provocation, attacked the wife with a knife and caused her serious injuries. As a result of this assault, he was convicted of attempted murder and sentenced to prison. In view of that conduct, the court awarded title to the entire marital residence to the wife. To do otherwise, noted the court, would allow him to profit from the fact that his wife survived the attack. Had she died, he would not have been entitled to survive to the property. However, it is this extraordinary case to which the exception applies. On the other hand, in Pagan v. Pagan, 138 A.D.2d 685, 526 N.Y.S.2d 498, the court declined to consider an unintentional shooting of one spouse by another as an equitable distribution factor.

Adultery, perhaps traditionally viewed as one of the most serious of all types of marital fault, is not, by itself, sufficiently egregious to warrant consideration by the court in determining equitable distribution. SeeNolan v. Nolan, 107 A.D.2d 190, 486 N.Y.S.2d 415 (3rd Dept. 1985); Pacifico v. Pacifico, 101 A.D.2d 709, 475 N.Y.S.2d 952 (4th Dept. 1984).

This discussion has concerned marital misconduct. Economic misconduct may properly be considered by the court. SeeContino v. Contino, 140 A.D.2d 662, 529 N.Y.S.2d 14 (2nd Dept. 1988); Di Bella v. Di Bella, 140 A.D.2d 292, 527 N.Y.S.2d 541 (2nd Dept. 1988); Langdon v. Langdon, 138 A.D.2d 358, 525 N.Y.S.2d 649 (2nd Dept. 1988); Mahon v. Mahon, 129 A.D.2d 684, 514 N.Y.S.2d 446 (2nd Dept. 1987). Thus, for example, the court may consider--and should consider--whether a spouse has manipulated his or her lifestyle in order to frustrate the court’s ability to make a fair determination. SeeGriffin v. Griffin, 115 A.D.2d 587, 496 N.Y.S.2d 249 (2nd Dept. 1985). The court may properly consider the past financial irresponsibility of a party. Indeed, it would be most unfair, where one spouse has wastefully dissipated marital assets, to allow that spouse to share equally in the remaining assets, carefully preserved by a more thrifty spouse. Cf.Barnes v. Barnes, 106 A.D.2d 535, 483 N.Y.S.2d 358 (2nd Dept. 1984); Willis v. Willis, 107 A.D.2d 867, 484 N.Y.S.2d 309 (3rd Dept. 1985). The court may also consider whether a party has been candid and truthful in setting forth his or her finances during the course of the matrimonial action. SeeWilbur v. Wilbur, 116 A.D.2d 953, 498 N.Y.S.2d 525 (3rd Dept. 1986).

In Niland v. Niland, 291 A.D.2d 876, 737 N.Y.S.2d 214 (4th Dept. 2002), the court treated the value of the money withdrawn by the husband in contemplation of the action as a marital assert and awarded the wife 60% of the marital assets. Where marital assets are transferred to third parties after the commencement of the action, and the innocent spouse obtains a settlement from the third parties of a fraudulent conveyance action brought against them, the proceeds of the settlement are appropriately viewed as the separate property of the innocent spouse, even though the proceeds represent a return of marital property. Hasegawa v. Hasegawa, 290 A.D.2d 488, 736 N.Y.S.2d 398 (2nd Dept. 2002).

While marital misconduct is generally not an equitable distribution factor when considered in isolation, marital fault may be considered as part of the evaluation of economic fault. For example, in Maharam v. Maharam, 245 A.D.2d 94, 666 N.Y.S.2d 129 (1st Dept. 1997), the wife’s share of the marital estate was increased because of the husband’s secreting of assets and squandering of sizeable sums on luxury items and in admitted adulterous affairs.

The percentage awarded to compensate for economic fault must be fixed sufficiently high to provide effective deterrence for such conduct. For example, in Maharam, though the husband had secreted or wasted substantial sums, the trial court allowed the wife only a 55% share of the marital estate, a mere 5% above equality. Such a percentage would not compensate the wife for the loss of the absent property and would not effectively deter others from engaging such conduct. There would be little reason not to try to hide or waste money if the penalty to be exacted was a mere 5% out of the remaining funds. The Appellate Division, in recognizing that the percentage must be effective to compensate the injured spouse, penalize the erring spouse, and deter others, adjusted the shares so that the wife received 65% of the marital estate.
 
C236B:28: Equitable Distribution--Other Possible Factors

Statutory equitable distribution Factor 14, originally Factor 10, authorizes the consideration of any other factor which the court shall expressly find to be “just and proper” to consider. While this factor was initially drafted with the question of marital fault in mind, the court is allowed the discretion to consider any circumstances, not specifically addressed in the legislative factors, provided that the court makes an express finding that it is just and proper to consider the additional matters. The authority given to the court to consider additional circumstances as a matter of discretion is intended to afford flexibility so that the court may take into account all considerations needed to do justice in a particular case. Matrimonial cases are so numerous and the facts so unique to each case that any statutory schedule of factors would be inadequate and any blind adherence to an exclusive list would prevent the courts from bringing the fullness of their wisdom and experience to the resolution of the case.

Three factors developed by the courts under original Factor 10 have, in the intervening years since the enactment of the Equitable Distribution Law, become legislative factors. These factors are now Factors 11, 12, and 13.

Thus, while Factor 11 calls for consideration of tax consequences, prior case law held that tax considerations should be taken into account. SeeNolan v. Nolan, 107 A.D.2d 190, 486 N.Y.S.2d 415 (3rd Dept. 1985); Ryan v. Ryan, 92 A.D.2d 889, 459 N.Y.S.2d 863 (2nd Dept. 1983).

Factor 12 requires the consideration whether there has been a wasteful dissipation of assets by either spouse. Although wasteful dissipation of assets previously was only an express factor in maintenance determinations, the courts could properly consider such waste of assets as a discretionary factor. SeeWillis v. Willis, 107 A.D.2d 867, 484 N.Y.S.2d 309 (3rd Dept. 1985). However, expenditures which were agreed to and enjoyed by both parties but which, in hindsight, seem provident to parties who can no longer reach rational agreement, should not be held against one party as a waste of assets.

Factor 13 authorizes the court to consider any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration.

In addition to the factors now legislatively added, other non-statutory factors may be considered. For example, inAckley v. Ackley, 100 A.D.2d 153, 472 N.Y.S.2d 804 (4th Dept. 1984), the court took cognizance of the fact that the parties’ acquisition of the marital residence had been greatly assisted by the wife’s parents. In that case, the wife’s parents transferred the residence to the parties for less than market value. Though the residence was marital property, the wife, in equitable distribution, received most of its value. The Appellate Division sustained this result, recognizing, as just and proper factors, the desire of the wife’s parents to benefit her primarily and the husband’s limited economic contribution to that asset.

In Sementilli v. Sementilli, 102 A.D.2d 78, 477 N.Y.S.2d 626 (1st Dept. 1984), the court ruled that it was proper to deduct from the husband’s share of the proceeds of marital property the amount of arrears he owed under a support order. While a dissent argued that the husband’s failure to pay support caused an increase in property (and prevented a decrease), the majority concluded that it would be unfair and improper to reward a party for disregarding support orders by releasing him from arrears in the guise of equitable distribution.

In Rado v. Rado, 298 A.D.2d 887, 747 N.Y.S.2d 870 (4th Dept. 2002), the court held that, under the circumstances, the husband was properly given exclusive possession of marital residence, which had previously belonged to his parents, as well as the right to buy-out the wife’s interest. However, the appellate court added a requirement that the husband exercise the option within 120 days or else residence was to be sold and proceeds divided equally.

In Cozza v. Colangelo, 298 A.D.2d 914, 747 N.Y.S.2d 641 (4th Dept. 2002), the court viewed it as inequitable to award the husband any interest in a house that the wife purchased during marriage but after the parties had separated. The wife made a small down payment on the house, using funds from her student loans. Because the net value of the property was minimal, and the property was purchased at a time when the parties no longer had an economic partnership, it was held inequitable to distribute a portion of that marital asset to the husband. See also Wagner v. Dunetz, 299 A.D.2d 347, 749 N.Y.S.2d 545 (2nd Dept. 2002).

In David v. Pillai, 303 A.D.2d 708, 757 N.Y.S.2d 326 (2nd Dept. 2003), where the parties’ marriage was declared void on the ground that the husband was still married to his first wife, a fact unknown to the second wife, the court directed the second wife to reimburse the husband for his contribution to the real property purchased during the purported marriage but refused to provide for any further equitable distribution to the husband on the ground of his bad faith.

As discussed in C236B:27 above, economic fault of the parties is a relevant consideration in equitable distribution, although marital fault is not.
 
C236B:29: Equitable Distribution--The Use of Distributive Awards

The first sentence of subdivision 5(e) of Part B authorizes the court to make a distributive award, in lieu of equitable distribution, where it would be impractical or burdensome, or where the distribution of an interest in a business, corporation, or profession would be contrary to law. A distributive award consists of payments made to effectuate a property distribution, whether made in a lump sum or spread out over time. See Part B, subd. (1[b]).

The use of a distributive award, in order to pay a spouse an equitable share of the other spouse’s business interest, may be particularly appropriate. It might well be impractical or burdensome to compel the parties to maintain a continuing financial association by making one spouse, in effect, the partner or co-shareholder of the other. The statute recognizes that the best approach, with the least potential for prejudice and further emotional strain, may be to keep the business interest of one spouse separate from the other but provide, instead, for a payment of an equitable share in cash.

The statute also recognizes that a distributive award may be mandatory where the business of one spouse is a regulated profession or occupation and the other spouse lacks the requisite knowledge and qualifications to participate in the business. Thus, distributive awards may be appropriately fashioned where the marital asset involved is an interest in a professional practice or a professional license. SeeO’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 489 N.E.2d 712 (1985); Arvantides v. Arvantides, 97 A.D.2d 939, 468 N.Y.S.2d 728 (4th Dept. 1983), affirmed as modified, 64 N.Y.2d 1033, 489 N.Y.S.2d 58, 478 N.E.2d 199 (1985); Litman v. Litman, 93 A.D.2d 695, 463 N.Y.S.2d 24 (2nd Dept. 1983), affirmed, 61 N.Y.2d 918, 474 N.Y.S.2d 718, 463 N.E.2d 34 (1984).

The use of distributive awards is proper, also, where the marital property is not liquid and liquidation of those assets would have significant adverse tax consequences. Nolan v. Nolan, 107 A.D.2d 190, 486 N.Y.S.2d 415 (3rd Dept. 1985). A distributive award may be employed, even where tax consequences are not implicated, where one party desires to retain an asset, such as the marital residence, rather than selling it to a third party and has the financial ability to make payment of a suitable distributive award.

Distributive awards can be made to avoid or, in lieu of, an actual physical division of property. However, there is no authority for making a distributive award to provide compensation to a spouse. Thus, an award cannot be made for the dislocation caused by the marriage, or its termination, and an award can not be used as a devise to reimburse a spouse for lost earnings during the marriage. SeeCappiello v. Cappiello, 66 N.Y.2d 107, 495 N.Y.S.2d 318, 485 N.E.2d 983 (1985), reargument denied, 67 N.Y.2d 647, 499 N.Y.S.2d 1031, 490 N.E.2d 558. However, consideration of lost earnings is a factor in making a maintenance determination. Further, the court may consider homemaker services in determining an equitable distribution and, once having decided on how to divide marital property, the court may use a distributive award to facilitate its distribution plan.
 
C236B:30: Separate Property to Remain Separate

Subdivisions 5(b) and (c) provide the two basic guidelines for determining the “respective rights of the parties in their separate or marital property” and must be read together.

Subdivision 5(b) provides that “separate property shall remain such”. By use of the word “shall”, it is apparent that the court’s authority is limited and that its responsibility is mandatory. The court must determine what property is separate property and what property is otherwise exempt from equitable distribution though not specifically within the statutory definition of separate property. Thus, while property acquired after the commencement of a matrimonial action is not expressly included in the statutory definition of separate property, it is not marital property and may not be distributed.

In many instances, the court will be required to sift through factual disputes in order to determine what is separate property. For example, there may be dispute as to what property was acquired before, and what property after, the marriage. There may be dispute as to whether a gift from a third party was intended for only one of the spouses (a gift which would be separate property) or to both of them (a joint gift which would constitute marital property). SeeBidwell v. Bidwell, 122 A.D.2d 364, 504 N.Y.S.2d 327 (3rd Dept. 1986). Where the proof is equivocal, the court should be able to rely upon a presumption that property is marital unless and until the contrary is clearly established. SeeLischynsky v. Lischynsky, 120 A.D.2d 824, 501 N.Y.S.2d 938 (3rd Dept. 1986). Such a presumption seems justified by the legislative intent and by the fact that any injustice can be avoided by taking all of the facts, circumstances, and factors into account when it comes to making an equitable distribution of the property. Indeed, it may be harsh, where the property in dispute is the only significant property, to rely upon equivocal proof to brand the property separate. Where the court determines that property is separate, it must specify its reasons for that determination. Edwards v. Edwards, 118 A.D.2d 1015, 500 N.Y.S.2d 386 (3rd Dept. 1986).

Where separate property has been commingled with marital property or placed into the joint names of the parties, a presumption of gift arises and, unless rebutted, the property is treated as marital. See, e.g.Wiercinski v. Wiercinski, 116 A.D.2d 789, 497 N.Y.S.2d 179 (3rd Dept. 1986); Parsons v. Parsons, 101 A.D.2d 1017, 476 N.Y.S.2d 708 (4th Dept. 1984); Zacharek v. Zacharek, 116 A.D.2d 1004, 498 N.Y.S.2d 625 (4th Dept. 1986); Coffey v. Coffey, 119 A.D.2d 620, 501 N.Y.S.2d 74 (2nd Dept. 1986). However, the spouse may receive credit for the amount of separate property contributed to the creation of a marital asset. Coffey v. Coffey, supra; Parsons v. Parsons, supra; Duffy v. Duffy, 94 A.D.2d 711, 462 N.Y.S.2d 240 (2nd Dept. 1983). Further, the fact that property is classified as marital property does not mean that a party is entitled to an equal share of it. The court may properly take into account the origin of the property. SeeAckley v. Ackley, 100 A.D.2d 153, 472 N.Y.S.2d 804 (4th Dept. 1984).

Once the court has determined that property is separate or is otherwise exempt from equitable distribution, its task is to provide that the property “shall remain” separate property. To do that, the court must provide in its judgment that title to the separate property is to remain with the spouse whose separate property it is. Separate property is restored to the owner spouse before marital property is distributed. Anonymous v. Anonymous, 120 A.D.2d 983, 503 N.Y.S.2d 466 (4th Dept. 1986).

However, separate property may be charged for the payment of joint debts. Douglas v. Douglas, 132 Misc.2d 203, 503 N.Y.S.2d 530 (Sup.Ct. Suffolk County 1986). Additionally, under both the second unnumbered clause of the first sentence of DRL Section 234 and under subdivision 5(j) of Part B of Section 236, the court may award possession of separate property to the non-owner spouse where proper--and special--circumstances warrant.
 
C236B:31: Exclusive Occupancy and Possession of the Marital Home

Subdivision 5(f) of Part B provides that, apart from directing the distribution of property, the court may, pursuant to DRL § 234, make an order regarding the use and occupancy of the marital home and its household effects. This aspect of the statute is really a reminder and dovetails with equitable distribution Factor 3.

The last phrase of subdivision 5(f) constitutes a major change in the law. Under DRL § 234, prior to the advent of equitable distribution, it was generally regarded as an improvident exercise of discretion to award a spouse exclusive occupancy of a residence owned solely by the other spouse. See, e.g.,Dubno v. Dubno, 51 A.D.2d 693, 379 N.Y.S.2d 106 (1st Dept. 1976). Subdivision 5(f) provides that an award may be made “without regard to the form of ownership of such property”. The “form of ownership” is a reference to the form in which title is held. Thus, the fact that title to the marital residence is in the name of one party does not preclude an award of exclusive occupancy to the other spouse. Indeed, the determination should be made without regard to who holds title.

The situation is somewhat different where the marital residence is separate property. The provisions of Part B reflect a clear legislative intent not to deprive a person of title or possession of separate property, such as property acquired before the marriage. Thus, the view has been expressed that the court may not award one spouse exclusive occupancy of another spouse’s separate property. Such an iron-clad rule seems unwise. The statute itself, while requiring separate property to remain such, does not preclude an award of exclusive occupancy of separate property. Indeed, in many situations, the separate property may be in part marital, i.e., the appreciation in the separate property due, in part, to the contributions of the non-owner spouse. A fairer approach may be require the non-owner spouse who seeks exclusive occupancy of the other’s separate property to meet a higher standard in establishing that such relief is warranted. Flexibility is the key to possession and occupancy determinations and, as reluctant as the courts may be to grant exclusive occupancy as to separate property, there may well be special circumstances where such relief is appropriate. Important to consider are the lifestyle of the parties, the presence of children, the availability of equivalent and suitable alternative housing accommodations, and whether funds can be supplied, through maintenance, distribution of other property, or child support, to pay for those alternatives. SeeForbush v. Forbush, 115 A.D.2d 335, 496 N.Y.S.2d 311 (4th Dept. 1985), appeal dismissed 67 N.Y.2d 756, 500 N.Y.S.2d 1027, 490 N.E.2d 1233. An example of the judicial reluctance to grant exclusive occupancy of separate property is Wood v. Wood, 139 A.D.2d 506, 526 N.Y.S.2d 608 (2nd Dept. 1988).

Nolan v. Nolan, 215 A.D.2d 795, 626 N.Y.S.2d 568 (3rd Dept. 1995) restated the judicial preference for permitting a custodial parent to remain in the marital home until the youngest child attains age 18. The preference can be overcome only by a showing that the custodial parent can obtain comparable housing at a lesser cost. According to Nolan, the preference can also be overcome by a showing that the custodial parent is financially incapable of maintaining the marital residence or that either spouse is in immediate need of his or her share of the sale proceeds. However, these two factors require some elaboration. By permitting sale of the marital residence on a showing that the custodial parent cannot afford the residence, the court is, in essence, permitting a sale upon a showing that the marital residence has become a luxury that the parties can no longer afford. Clearly, if the marital residence should be retained but the custodial parent cannot afford it, the court can look to additional support from the non-custodial parent, either by maintenance or child support. The factor of inability to afford the house addresses the inability of both parents to afford the house. This can occur due to reduced income, as where a parent has lost a job or suffered a decrease in pay; it can also occur due to increased expenses, as where the house was just barely affordable and the post-divorce expenses of running two households made the marital residence unaffordable. The notion that the house can be sold where either party has an immediate need for his or her share of the sales proceeds is also a trifle overstated. The real question is whether the needs of the custodial parent and children to remain in the house are outweighed by either parent’s need for immediate access to funds. Unless the parties are burdened with heavy debt or with heavy expenses (such as college costs) which can be met only by using the equity in the house, it is rare for the need for immediate access to the sale proceeds to outweigh the need for younger children to remain in their present home. See, for example, Mitzner v. Mitzner, 209 A.D.2d 487, 619 N.Y.S.2d 51 (2nd Dept. 1994).

The court should not award exclusive occupancy where it has determined to award the occupying spouse sole title to the property. Exclusive occupancy is appropriate only where both parties are to retain an interest in the property until a future date. Where the occupying spouse is to receive sole title, the court should restrain the ability of the occupying spouse to act with respect to what is now his or her sole property. Thus, in one case, where the wife was awarded sole title to the residence, it was ruled improper to order to sell it. Once a party is given sole title under equitable distribution, the party is entitled to do with it as he or she pleases. Bisca v. Bisca, 108 A.D.2d 773, 485 N.Y.S.2d 302 (2nd Dept. 1985), appeal dismissed 66 N.Y.2d 741, 497 N.Y.S.2d 365, 488 N.E.2d 111. Of course, a sale of the property might impact upon maintenance.
 
C236B:32: Mandate to Distribute Property

Subdivision 5(a) of Part B provides that, in a qualifying action or proceeding, the court “shall” determine the rights of the respective parties in marital and separate property and “shall” provide for the disposition of the property in its final judgment. “Shall” is a word of direction; the court is required to take the action. The court must, where the action qualifies as one where equitable distribution can be made, determine the property rights of the parties and provide for the disposition of the property in the judgment. Equitable distribution must be made even where one party is in default. Ettinger v. Ettinger, 107 Misc.2d 675, 435 N.Y.S.2d 916 (Sup.Ct. Nassau County 1981).

In Harrell v. Harrell, 120 A.D.2d 565, 502 N.Y.S.2d 57 (2nd Dept. 1986), the court dealt with a case in which the husband could not account for over $40,000 in marital property. The trial court declared itself unable to take action with regard to the missing assets. The Appellate Division reversed, holding that the mandate of the statute to equitably distribute property may not be avoided by retaining, secreting, or dissipating marital assets. It ordered the case returned to the trial court for an equitable distribution determination. In a case such as Harrell the court should distribute all remaining assets, with an eye on the economic misconduct, and, in any event, make a distributive award as to the missing items. Such an award would be incorporated into the judgment and then enforced.

A counterpoint case to the Harell case is Seeley v. Seeley, 135 A.D.2d 703, 522 N.Y.S.2d 603 (2nd Dept. 1987). There, the court found that marital funds were expended, prior to the demise of the marriage, by both parties for their mutual benefit. As a result, no claim could be asserted for such funds. See alsoLevine v. Levine, N.Y.L.J., June 7, 1988 (Sup.Ct. Queens County).

The emerging view seems to be that, where one party, prior to (or even after) the commencement of the action, secretes or dissipates assets, such actions do not defeat the right of the other party to equitable distribution. However, parties may not use the courts to reargue spending decisions, made in good faith prior to the demise of the marriage.

Two other mandate cases to note are Cohen v. Cohen, 184 A.D.2d 347, 185 A.D.2d 197, 585 N.Y.S.2d 348 (1st Dept. 1992) and Rosenkrantz v. Rosenkrantz, 184 A.D.2d 478, 585 N.Y.S.2d 426 (1st Dept. 1992). In the Cohen case, it was held that the trial court had “overlooked” defendant’s interest in a pension trust and, on remand, this asset had to be accounted for. In Rosenkrantz, it was determined that the trial court had erred by not equitably distributing the proceeds of certain stock transactions which were disclosed on the husband’s tax returns. These cases make an important point.

Under burden of proof principles (see Practice Commentary C236B:33), a party who is trying to have an item distributed must prove that the item exists, establish that it is marital property (aided by the presumption that it is), and provide some testimony as to value. This burden can be readily met and, sometimes, the burden is so quickly and easily met that the court can overlook it. For example, a party may show that there were proceeds from stock sales simply by having a tax return, in which those sale are reported, offered in evidence. Even if the party does not highlight the relevant portion of the return for the court, the party has succeeded in meeting his or her burden.

In order for the court and the parties to be certain what each party is asking the court to distribute, the court should, at the end of the case, require each party to submit a list of the items subject to distribution.

Some courts have relied on statements of proposed disposition to accomplish this unmasking of the issues. But not all courts insist on those statements. And, in any event, those statements are proposals and are not binding. Post-trial briefs do not do the job either, since those briefs ordinarily are not part of the record used on an appeal. Pre-trial statements may not suffice to bind the parties either, since evidence of additional items may be received, sometimes unintentionally, during the trial.

It is submitted that sound practice is to have each party identify the items he and she want distributed, after both sides have rested.

Where a fair amount of property is in contention, the testimony in equitable distribution trials can become protracted and complicated. Where the testimony is very detailed, or where the trial does not proceed day to day, the judges often find it useful to have the trial transcript to review when composing a decision. The trial court seems to have the authority to compel the parties to order the transcript. Since obtaining the transcript can be an expensive proposition, the court should not routinely require parties to order them, but should evaluate the need for the transcript in light of the necessities of the case, the amounts involved, and the circumstances of the parties.

Nevertheless, the failure to provide an ordered transcript is not a ground upon which the court can dismiss the case or refuse to equitably distribute the property. Colonna v. Colonna, 208 A.D.2d 671, 617 N.Y.S.2d 820 (2nd Dept. 1994); Kokalari v. Kokalari, 166 A.D.2d 418, 560 N.Y.S.2d 484, (2nd Dept. 1990). Rather, the court will have to prepare the decision without the transcript.

Of course, a party who fails to obtain a transcript that the court has ordered will not curry favor with the court, particularly as the court composes the decision from notes and exhibits, perhaps grumbling about the lack of a transcript. The court could also punish the disobedient party through its contempt powers. But, given the statutory mandate to distribute property, the court cannot refuse to make a decision or dismiss the case.

It is not uncommon for the parties to stipulate to obtain the transcript, with the parties to share the cost or with the more affluent party to advance the cost. Where a party has advanced the cost of the transcript under a stipulation which entitles that party to credit for one-half of the expense, the court must give effect to that stipulation. Krinsky v. Krinsky, 208 A.D.2d 599, 618 N.Y.S.2d 36 (2nd Dept. 1994). Where the marital assets are being equally divided, it would ordinarily seem fair to have each party bear half the cost of the transcript, even in the absence of a stipulation. It also seems fair, where one party is more affluent than the other, to have the better-off spouse advance the costs, subject to a credit or reimbursement down the road.
 
C236B:33: Burden of Proof

A party seeking to obtain an interest in property held by the other spouse must establish entitlement to an interest in that property. In order to do so, the party must adduce proof of the status of the property and its value. If a party fails to do so, title and ownership will be left as is. Rodgers v. Rodgers, 98 A.D.2d 386, 470 N.Y.S.2d 401 (2nd Dept. 1983), appeal dismissed 62 N.Y.2d 646, 476 N.Y.S.2d 1028, 464 N.E.2d 990 (1984); see also Cassano v. Cassano, 111 A.D.2d 208, 489 N.Y.S.2d 243 (2nd Dept. 1985); Bidwell v. Bidwell, 122 A.D.2d 364, 504 N.Y.S.2d 327 (3rd Dept. 1986). Where the property is held jointly, an equal disposition of that property should be presumptively in order, with the burden on the party seeking a greater share to establish entitlement. Where it is claimed that property is separate property, the burden should be on the party claiming the property as separate to establish that such is the case. On the other hand, where the property is separate property but a spouse is seeking an award based on appreciation in value of the separate property during marriage, the burden is on the non-owner spouse to establish his or her entitlement to such an award. SeePrice v. Price, 69 N.Y.2d 8, 511 N.Y.S.2d 219, 503 N.E.2d 684 (1986), affirmed 69 N.Y.2d 8, 511 N.Y.S.2d 219, 503 N.E.2d 684; Billington v. Billington, 111 A.D.2d 203, 489 N.Y.S.2d 89 (2nd Dept. 1985).

A corollary rule is that if evidence is introduced as to the value of certain marital property but the court fails to address that property in its decision, the court’s failure may be complained of on appeal and the action remitted for a computation of the value of that property and for a determination as to the distribution thereof. SeeTrickel v. Trickel, 88 A.D.2d 741, 451 N.Y.S.2d 871 (3rd Dept. 1982).
 
C236B:34: The Decision and Its Review

The Equitable Distribution Law requires that the court distribute property “equitably”, upon consideration of specific statutory factors, other just factors, and upon the circumstances of the case and of the parties. In contrast to former law with respect to alimony determinations (Part A, subd. 1), the court is not expressly empowered to exercise its discretion in making a property distribution. However, the very term “equitable” means that the court should direct what it believes is just and proper in light of the relevant facts and factors and such determination calls for a sound exercise of the court’s discretion.

The Court of Appeals has ruled that the question of whether marital property should be physically distributed or a distributive award made in lieu thereof is largely a question of discretion. However, on that issue the discretionary power of the Appellate Division is just as broad as that of the trial court. The Court of Appeals’ review of how that discretion is exercised is limited to those instances where the exercise of discretion is “so egregious that it can be characterized as an abuse of discretion as a matter of law.” Majauskas v. Majauskas, 61 N.Y.2d 481, 474 N.Y.S.2d 699, 706, 463 N.E.2d 15 (1984). Indeed, unless the exercise of discretion meets that standard or unless the exercise of discretion is infected with an error of law, it may not be reviewable at all by the Court of Appeals. The Court of Appeals has likewise held that the amount of a distributive award is also within the discretion of the trial court and, on review, of the Appellate Division. O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 489 N.E.2d 712 (1985). It would also appear that the percentage of marital property awarded to each party is likewise a discretionary determination. On the other hand, it seems that questions such as whether property is marital or separate raise pure issues of law, fully reviewable at the Court of Appeals level.

The Legislature has attempted to limit the discretion of the court. One such limit is the provision for consideration of specific statutory factors. The second limitation is encountered in subdivision 5(g). In any decision made pursuant to subdivision 5, including property distribution, distributive award and exclusive possession, the court “shall” set forth the factors it considered and the reasons for its decision. The mandatory requirement imposed upon the court cannot be waived by either spouse or their attorneys. Similar requirements are imposed with respect to maintenance. See Part B, subdivision 6(b).

The purpose of these provisions is to try to prevent an arbitrary exercise of discretion by requiring that the court describe the factors it considered, identify its reasons, and explain its conclusion. At the same time, the provision fosters meaningful review by the appellate courts of the facts found and the conclusions of law reached. The written discussion of the facts found and the legal conclusions may also prove useful on later applications for modifications of maintenance and child support.

The decision requirements contained in the Equitable Distribution Law must be read together with the general requirements for non-jury trial decisions found in CPLR 4213. The court there is required to state the facts it deems essential for its decision. CPLR 4213(b). It may be helpful for the court to permit, or direct, the parties to submit requests for proposed findings of fact. Cf. CPLR 4213(a). This may help to assure that all factors relevant have been considered and may assist the court in reviewing the record and understanding the parties’ respective positions.

Much case law has surrounded the discussion provided of the statutory factors in the decision. The court need not analyze each of the statutory factors and give reasons as to each factor. Cappiello v. Cappiello, 66 N.Y.2d 107, 495 N.Y.S.2d 318, 485 N.E.2d 983 (1985), reargument denied, 67 N.Y.2d 647, 499 N.Y.S.2d 1031, 490 N.E.2d 558. On the other hand, mere enumeration of the factors considered is insufficient. Hornbeck v. Hornbeck, 99 A.D.2d 851, 472 N.Y.S.2d 456 (2nd Dept. 1984). Insufficient, too, is brief allusion to a few factors. Gulli v. Gulli, 118 A.D.2d 970, 500 N.Y.S.2d 82 (3rd Dept. 1986), on reconsideration 123 A.D.2d 468, 506 N.Y.S.2d 288. What is required is for the court to set forth the factors it did consider and the reasons for the awards and determinations it made. O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 489 N.E.2d 712 (1985). The court should, though perhaps not strictly required, provide a discussion as to each of the factors it did consider and it may be a further aid to a reviewing court if the court explains why it did not consider other factors.

A failure to comply with the statutory direction may result in a remission to the court below for a further writing. E.g., Kobylack v. Kobylack, 62 N.Y.2d 399, 447 N.Y.S.2d 109, 465 N.E.2d 829 (1984), on remand 111 A.D.2d 221, 489 N.Y.S.2d 257; Diachuk v. Diachuk, 117 A.D.2d 985, 499 N.Y.S.2d 532 (4th Dept. 1986); O’Sullivan v. O’Sullivan, 94 A.D.2d 407, 464 N.Y.S.2d 583 (3rd Dept. 1983); Hornbeck v. Hornbeck, 99 A.D.2d 851, 472 N.Y.S.2d 456 (2nd Dept. 1984). However, a remission will not be made, and an appeal will be decided on the merits, where the rationale of the trial court is sufficiently developed to permit intelligent review. See, e.g., Rubin v. Rubin, 105 A.D.2d 736, 481 N.Y.S.2d 172 (2nd Dept. 1984).

One of the more vexing problems is where the parties fail to adduce proof on relevant statutory factors. One would suppose that it is the responsibility of each counsel to offer proof on the relevant factors as part of the adversarial process of litigation. However, there are holdings that, where counsel fails to present an adequate record, it is the court’s responsibility to assure that sufficient evidence is presented. SeeCassano v. Cassano, 111 A.D.2d 208, 489 N.Y.S.2d 243 (2nd Dept. 1985). Where the court has concern that the parties have not adduced proof on a relevant point, it would seem appropriate for the court to call the attention of both counsel to that deficiency. However, it would seem the better rule to place responsibility for the presentation of evidence upon counsel and not upon the court.

The discretionary power of the Appellate Division is just as broad as those of the trial courts. However, where the Appellate Division invokes this discretionary authority to alter what the trial court did, the Appellate Division becomes subject to the statutory mandate that the factors considered and reasons for the decision be identified and explained in its opinion. SeeKobylack v. Kobylack, 62 N.Y.2d 399, 477 N.Y.S.2d 109, 465 N.E.2d 829 (1984).
 
C236B:35: Post-Divorce Maintenance--General Concepts

Subdivision 6 sets forth the substantive provisions in respect of maintenance, i.e. spousal support. Maintenance may be awarded in any matrimonial action. The list of matrimonial actions to which Part B generally applies is set forth in subdivision 2 and includes separation actions. Unlike equitable distribution, which cannot be granted unless certain matrimonial relief is granted (see Part B, subd. 5[a]), maintenance can be awarded even if the matrimonial relief is denied.

Maintenance refers to the spousal support award made after trial; temporary maintenance is pendente lite spousal support. The statutory definition of maintenance was drafted with an eye toward the Internal Revenue Code which provides that alimony (spousal support) payments are deductible by the payor spouse and are taxable to the recipient spouse, provided that certain conditions are met.

Maintenance is defined (Part B, subd. 1[a]) as payments to be made “at fixed intervals” in order to “meet the reasonable needs of a party to the matrimonial action.” In essence, maintenance consists of periodic payments made by one spouse (or former spouse) for, or toward, the support of the other. Maintenance is spousal support; under Part A of Section 236 (effective in actions commenced prior to July 19, 1980), payments for support of a spouse were called “alimony.” The term alimony carried with it sexist perceptions and connotations, at least to the general public. Because substantial changes have been made in the law governing spousal support, whatever it is called, it was for the best that the label was changed in order to red-flag the change in some basic concepts. Moreover, the term “maintenance” is functional and descriptive, without being loaded down with implied values built up over generations.

An award of maintenance is to terminate upon the death of either party or upon the remarriage, whether valid or invalid, of the recipient. A maintenance award is also to terminate upon modification of the final judgment made pursuant to DRL Section 248. Section 248 provides for modification where the “wife” has remarried or where she lives habitually with another man and holds herself out as his wife. In view of the language providing that an award of maintenance “shall terminate upon” death of either and on the remarriage of the recipient, it may be that termination on those grounds is to be automatic. Under Section 248, termination for either a remarriage or a “holding out” as married is not self-executing--a court order is necessary. That the Part B definition specifically provides for termination upon remarriage of the recipient, in addition to the reference to Section 248 lends some support to a construction of the statute as making such termination automatic. Termination of maintenance in a holding-out-as-married situation still can be done only by court order.

It is error for the trial court to direct that maintenance continue after remarriage of the recipient or to direct that maintenance be increased if an equitable distribution award is not paid or discharged in bankruptcy. Gold v. Gold, 276 A.D.2d 587, 714 N.Y.S.2d 323 (2nd Dept. 2000). Even though the court may have reduced the equitable distribution award to account for maintenance or reduced the maintenance award to account for expected distributive award payments, such possibilities may be addressed by an appropriate modification application should they arise. Further, if the court intended some portion of maintenance to be a property distribution, it should so provide, rather than to disguise it as maintenance. While the parties by agreement may vary the rules (including the rule terminating maintenance upon remarriage), the court may not do so.

The court may not order maintenance, temporary or otherwise, where the parties have entered into an antenuptial or separation agreement “providing for maintenance” pursuant to Part B(subdivision 3). As under former law, the existence of a separation agreement bars temporary maintenance and counsel fees: the agreement stands until it is set aside and that sort of relief is generally left for the trial court. SeeMatter of Gotthainer v. Gotthainer, 107 Misc. 2d 221, 435 N.Y.S.2d 444 (Fam. Ct. Ulster County 1980).

An “opt-out” agreement bars temporary maintenance or maintenance only where an agreement provides for maintenance. If an agreement does not provide for maintenance, there is no automatic bar. However, it may be that parties were possessed of sufficient separate property, income, or have divided significant marital property so as to indicate that both should be self-supporting. An agreement which does not provide for maintenance where there is a needy spouse may be subject to attack on grounds of fairness. See DRL § 236, Part B(subd. 3).

Maintenance need not be ordered to continue indefinitely. The court has the authority and discretion to, in advance, provide that maintenance will last only for a given period of time. In Blisko v. Blisko, 149 A.D.2d 127, 544 N.Y.S.2d 670 (2nd Dept. 1989), the Appellate Division ruled that a fixed durational limitation may not be imposed in cases where marital status relief is denied. To impose a durational limitation, the court reasoned, where the parties are still married, would be contrary to the public policy that spouses are liable for each other’s support and would inappropriately treat the marriage as financially ended, though legally it is not.

Maintenance may be awarded notwithstanding the denial of matrimonial status relief. Graves v. Graves, 177 Misc. 2d 358, 675 N.Y.S.2d 843 (Sup.Ct. Richmond County 1998). However, the Appellate Division, Third Department, has held that where plaintiff, whose divorce action was dismissed, failed to seek temporary maintenance during the pendency of the action, she should not be awarded permanent maintenance. Murphy v. Murphy, 257 A.D.2d 798, 683 N.Y.S.2d 650 (3rd Dept. 1999). Her proper remedy was held to be an application for support pursuant to Article 4 of the Family Court Act. This holding appears to be overly broad, to the extent that the court suggests that an award of permanent maintenance is barred as a matter of law. The matrimonial court clearly may award maintenance, notwithstanding the dismissal of the action. Likewise, a party is not under an obligation to move for temporary maintenance. Further, by referring a party to Family Court, the matrimonial court is compelling the parties to endure another round of litigation and frustrating the financial discovery and preparation that was engaged in prior to the trial of the matrimonial action. If the parties have prepared to litigate the financial issues, it would seem appropriate, absent unusual circumstances, to permit the parties to litigate such of the financial issues that survive the dismissal of the complaint, without relegating them to another round of proceedings.

In 1986, after six years of experience with maintenance determinations under Part B, the Legislature extensively reworked the applicable provisions concerning maintenance awards. The Legislature expressed the view that the maintenance provisions of the Equitable Distribution Law had been “incorrectly interpreted” by the courts so as to “deny indefinite (permanent) maintenance to divorced women who come away from long term marriages” or from “short term marriages where there are young children to be cared for.” Such interpretations, it was said, contribute to the “feminization of poverty.” 1986 Assembly Memorandum In Support of Assembly Bill 10567-A. On the basis of these legislative findings, Section 236, Part B, subdivision 6, was revised so as to soften the statute’s original stress on maintenance for the purpose of meeting “reasonable needs.” Rather, in ordering maintenance or temporary maintenance, the court is to award the amount that justice requires, having regard for the “standard of living of the parties established during the marriage,” as well as whether the party seeking maintenance has sufficient property and income to provide for his or her own reasonable needs, whether the supporting resisting party has sufficient property and income to provide for the reasonable needs of the other, and for the circumstances of the case and of the respective parties. The effect of these changes is to place more stress, but not conclusive stress, on the marital standard of living. While the court must still consider the “reasonable needs” of the parties, what is reasonable should be viewed within the context of the parties’ established living standard and not by a more abstract, and narrow, view of need.

In Hartog v. Hartog, 85 N.Y.2d 36, 623 N.Y.S.2d 537, 647 N.E.2d 749 (1995), the court of appeals stressed that the predivorce standard of living is entitled to be treated as a preeminent factor in the decision as to maintenance. The court reviewed the history of the 1986 amendment to Section 236, Part B, which, as discussed above, moved the predivorce standard of living from mere inclusion in a list of factors into the statutory mandate itself. The purpose of the amendment was to register the Legislature’s concern with early equitable distribution cases in which economically dependent women of relatively advanced age received only limited maintenance after lengthy marriages. In Hartog, the Court of Appeals detected a swing back to more restrictive awards and issued an important policy statement to correct it.

At issue in Hartog was the length of the award, not the amount. The issue was of limited significance in the context of the case itself. The trial court directed lifetime support; the Appellate Division reduced the period to five years, noting the wife’s ability to be self-supporting. Neither period ultimately mattered since it was clear that the husband, stricken with a fatal illness, would not live very long anyway. Indeed, he died shortly after the court of appeals decision was handed down. The issue, in the context of the case, was important in terms of the amount of life insurance, or estate lien, that the wife sought to secure to protect her upon his death.

The Court of Appeals held that lifetime maintenance was appropriate on the facts presented. That the wife had the ability to be self-supporting by some standard of living did not mean that she was self-supporting in the context of the marital standard of living. Since the Appellate Division’s decision did not reflect consideration of the marital living standard, and the trial court’s did, the Court of Appeals reinstated the trial court’s decision.

Hartog should not be read as requiring lifetime maintenance in every case, even in cases involving a luxurious lifestyle. That the needy spouse has some ability to earn does not negate the possibility of lifetime support; however, the fact that the parties lived a “high life” standard does not guarantee entitlement to a lifetime of support. What is required is that the court consider the payee spouse’s reasonable needs and the predivorce standard of living in the context of the other statutory factors. See, e.g., Sergeon v. Sergeon, 228 A.D.2d 354, 644 N.Y.S.2d 264 (1st Dept. 1996); Fleitz v. Fleitz, 223 A.D.2d 946, 636 N.Y.S.2d 911 (3rd Dept. 1996); Garvey v. Garvey, 223 A.D.2d 968, 636 N.Y.S.2d 893 (3rd Dept. 1996); Kelly v. Kelly, 223 A.D.2d 625, 636 N.Y.S.2d 840 (2nd Dept. 1996); Nadel v. Nadel, 220 A.D.2d 565, 632 N.Y.S.2d 631 (2nd Dept. 1995); Damato v. Damato, 215 A.D.2d 348, 626 N.Y.S.2d 221 (2nd Dept. 1995).

In Holterman v. Holterman, 307 A.D.2d 442, 762 N.Y.S.2d 152 (3rd Dept. 2003), affirmed, 3 N.Y.3d 1, 781 N.Y.S.2d 458, 814 N.E.2d 765 (2004), nondurational maintenance was granted to the wife in view of the 19 years of marriage during which the wife sacrificed her career and in view of the fact that the wife was found unable to achieve reasonable parity to the marital standard of living with her own employment. In addition, while the wife’s medical condition did not preclude her obtaining employment, it did impact on when she could obtain employment and the amount she could earn. However, in Garner v. Garner, 307 A.D.2d 510, 761 N.Y.S.2d 414 (3rd Dept. 2003), leave to appeal denied, 100 N.Y.2d 516, 769 N.Y.S.2d 203, 801 N.E.2d 424 (2003), the court held that it was not appropriate to consider the marital standard of living as a factor in maintenance where the parties had not lived together for five years as of the time the action was commenced and had not lived together for eight years as of the time of trial. The court did not discuss or cite the statute. Perhaps the decision can be better viewed as implicitly acknowledging that there was no relevant marital standard of living to be considered as the parties had not resided together for so long.

In Burns v. Burns, 193 A.D.2d 1104, 598 N.Y.S.2d 888 (4th Dept. 1993), modified on other grounds, 84 N.Y.2d 369, 618 N.Y.S.2d 761, 643 N.E.2d 80 (1994), the award of maintenance was reduced from 11 years to 6 years, taking into account the predivorce standard of living, among other factors. And in Pejo v. Pejo, 213 A.D.2d 918, 624 N.Y.S.2d 290 (3rd Dept. 1995), decided just one month after Hartog, a durational limitation was imposed because financial reversals prevented the parties from maintaining their luxurious predivorce standard of living. See also Boughton v. Boughton, 239 A.D.2d 935, 659 N.Y.S.2d 607 (4th Dept. 1997). Thus, the marital living standard may give way to other factors. Blechman v. Blechman, 234 A.D.2d 693, 650 N.Y.S.2d 456 (3rd Dept. 1996).

There is no requirement that a durational limitation be imposed. Walsh v. Walsh, 226 A.D.2d 707, 641 N.Y.S.2d 704 (2nd Dept. 1996); Foy v. Foy, 121 A.D.2d 501, 503 N.Y.S.2d 823 (2nd Dept. 1986). No limitation should be imposed where needy spouse is unlikely to be completely self-supporting. Spencer v. Spencer, 230 A.D.2d 645, 646 N.Y.S.2d 674 (1st Dept. 1996); Roffey v. Roffey, 217 A.D.2d 864, 630 N.Y.S.2d 114 (3rd Dept. 1995); see Baker v. Baker, 240 A.D.2d 911, 659 N.Y.S.2d 123 (3rd Dep’t 1997); Sivigny v. Sivigny, 213 A.D.2d 243, 624 N.Y.S.2d 120 (1st Dept. 1995); Borra v. Borra, 218 A.D.2d 780, 631 N.Y.S.2d 76 (2nd Dept. 1995); Merzon v. Merzon, 210 A.D.2d 462, 620 N.Y.S.2d 832 (2nd Dept. 1994); Grotsky v. Grotsky, 208 A.D.2d 676, 617 N.Y.S.2d 517 (2nd Dept. 1994); Grenier v. Grenier, 210 A.D.2d 557, 620 N.Y.S.2d 139 (3rd Dept. 1994) (amount increased).

In two cases, the First Department has taken a liberal stance, adopting a rule that a durational limit is appropriate only where one can, within the time allowed, obtain training to become sufficiently self-supporting to achieve the standard of living to which he or she was accustomed in the past or to otherwise restore earning power to a previous level. Brownstein v. Brownstein, 167 A.D.2d 127, 561 N.Y.S.2d 216 (1st Dept. 1990); Zelnik v. Zelnik, 169 A.D.2d 317, 573 N.Y.S.2d 261 (1st Dept. 1991). However, that rule has not been universally applied. CompareBrownstein v. Brownstein, supra; Zelnik v. Zelnik, supra; Goldfarb v. Goldfarb, 173 A.D.2d 355, 175 A.D.2d 701, 569 N.Y.S.2d 725 (1st Dept. 1991); Kaprelian v. Kaprelian, 236 A.D.2d 369, 653 N.Y.S.2d 634 (2nd Dept. 1997); De Marco v. De Marco, 235 A.D.2d 1014, 652 N.Y.S.2d 898 (3rd Dept. 1997) with Warshaw v. Warshaw, 169 A.D.2d 408, 564 N.Y.S.2d 137 (1st Dept. 1991).

The Second Department, in Sperling v. Sperling, 165 A.D.2d 338, 567 N.Y.S.2d 538 (2nd Dept. 1991) held that each case must be analyzed on its own facts. However, it noted that a durational limit more often appears where the dependent spouse is relatively young and healthy and not required to care for young children. It also observed that lifetime maintenance has been awarded in cases involving recipient spouses in their mid to late 40s or older, and often in impaired health. The means of both parties are important, with the court wisely noting that, where the means of the parties are modest, the court can only strive to balance the level of the parties’ opportunity and deprivation. 165 A.D.2d at 344, 567 N.Y.S.2d at 542.

In Pickard v. Pickard, 33 A.D.3d 202, 820 N.Y.S.2d 547 (1st Dept. 2006), appeal dismissed, 7 N.Y.3d 897, 826 N.Y.S.2d 603, 860 N.E.2d 66 (2006), the court held that nondurational maintenance was properly awarded to the wife after a 23-year marriage, given her role in raising and educating two children, her minimal job skills, her being out of the workforce since 1977, and the parties’ respective financial positions.

In Verrilli v. Verrilli, 172 A.D.2d 990, 568 N.Y.S.2d 495 (3rd Dept. 1991), the court affirmed the award of permanent maintenance to a 58-year-old woman who had long been out of the workplace and whose husband, a physician, had a substantial earning capacity. In contrast, inPalestra v. Palestra, 300 A.D.2d 288, 751 N.Y.S.2d 509 (2nd Dept. 2002), the trial court’s award of nondurational maintenance to a 35-year-old wife was modified on appeal to limit the award to a period of three years, where wife had no child care responsibilities, had many years of experience as a bookkeeper, and did not reduce or lose lifetime earning capacity as result of having foregone opportunities during marriage.

The difficulty with developing a consistent legal standard is that each case is so dependent upon its own facts that it is difficult to apply rationales developed on one set of facts to other cases in which the facts are even slightly different. In Harmon v. Harmon, 173 A.D.2d 98, 578 N.Y.S.2d 897 (1st Dept. 1992), the court eliminated an award of lifetime maintenance that had been granted by the trial court. The Harmon court stated the lifetime maintenance, as granted in Brownstein and Zelnik, was appropriate only where a spouse is incapable of future self-support or has clearly subordinated a career to act as homemaker and parent. Other instances where lifetime support may be granted, according to Harmon, are where the needy spouse has no obvious skills or training or is mentally or physically ill. InHarmon itself, the court concluded that because the wife did have a substantial earning capacity and the children were either emancipated or in college, it was appropriate to limit the maintenance award to a reasonable period of time to enable her to update her work skills and enter the employment market, citing to the Second Department’s Sperling decision.

In evaluating the income and property of the parties, the trial court should consider any property or income increase that occurred between the time of commencement of the action and time of trial. Haines v. Haines, 44 A.D.3d 901, 845 N.Y.S.2d 77 (2nd Dept. 2007) (error not to consider that wife, who was seeking maintenance, had her earnings increase from $39,000 per year to $56,000 per year from time of commencement to time of trial; further, trial court erred by not considering income from wife’s second job as wife had held that job for several years prior to commencement of action, husband had worked more than 40 hours per week, and the additional income contributed to the preseparation standard of living).

The courts have focused on what lifetime support really means. Where the parties have put monies aside for their retirement, and those funds are equitably distributed, the courts have indicated a willingness to reduce, or terminate, maintenance upon the retirement of the employed spouse. Where substantial funds are available to both parties for their retirement years, it seems fair to allow both parties to retire in good faith, without the burden of having to support the other. After all, the very purpose for accumulating retirement and pension plans is to permit the parties to retire in relative comfort. Where there are enough retirement benefits available, one party should not be compelled to work longer than was contemplated during marriage in order to support the other. Protection, of course, can and should be provided to assure that any retirement is undertaken at an appropriate age and in good faith. Likewise, if a spouse does not retire, maintenance can continue as before.

An illustration is Hendricks v. Hendricks, 13 A.D.3d 928, 788 N.Y.S.2d 190 (3rd Dept. 2004), where the husband was ordered to pay maintenance until his retirement, which had been planned for within 3 years, at which point the wife would receive one-half of his pension benefits and 401K plan. Likewise, in Wheeler v. Wheeler, 12 A.D.3d 982, 785 N.Y.S.2d 170 (3rd Dept. 2004), maintenance was awarded until the wife attained age 66 or the husband retired; age 66 was age at which wife would reach full Social Security benefits. Further authority is Penna v. Penna, 29 A.D.3d 970, 817 N.Y.S.2d 313 (2nd Dept. 2006), where the court ordered that maintenance be paid only until the wife becomes eligible for full Social Security benefits at age 66 or remarries or dies. In that case, the appellate court reduced the amount of maintenance from $400 per week to $125 per week, given wife’s income, her reasonable needs, her separate property and the husband’s circumstances.

In McGarrity v. McGarrity, 211 A.D.2d 669, 622 N.Y.S.2d 521 (2nd Dept. 1995), it was provided that maintenance would be paid until the husband’s retirement, but with payments required until at least his 65th birthday. In that case, the determination was made in the light of the wife’s current employment, the substantial distributions expected by both parties from the husband’s profit-sharing plan, and the other equitable distribution provisions. Likewise, inMcLane v. McLane, 209 A.D.2d 1001, 619 N.Y.S.2d 899 (4th Dept. 1994), maintenance was ordered until the wife began to receive pension benefits from the husband’s prior employer. See De Marco v. De Marco, 235 A.D.2d 1014, 652 N.Y.S.2d 898 (3d Dept. 1997) (support ordered until husband’s attainment of age 65). In contrast, in Grenier v. Grenier, 210 A.D.2d 557, 620 N.Y.S.2d 139 (3rd Dept. 1994), support was continued past age 70, though reduced, mindful that there was no pension distribution. See also Verdrager v. Verdrager, 230 A.D.2d 786, 646 N.Y.S.2d 185 (2nd Dept. 1996) (support until 63 when Social Security starts); Fleitz v. Fleitz, 223 A.D.2d 946, 636 N.Y.S.2d 911 (3d Dept. 1996); Nappi v. Nappi, 234 A.D.2d 276, 651 N.Y.S.2d 51 (2nd Dept. 1996); Cameron v. Cameron, 238 A.D.2d 925, 661 N.Y.S.2d 113 (4th Dept. 1997) (reduction not automatic, application required); Costantino v. Costantino, 225 A.D.2d 651, 639 N.Y.S.2d 472 (2nd Dept. 1996) (husband may apply for reduction upon retirement; no indication that pension was distributed in equitable distribution).

In Lombardo v. Lombardo, 255 A.D.2d 653, 680 N.Y.S.2d 270 (3rd Dept. 1998), the court granted the wife maintenance until the husband attained age 62. In Lombardo, the husband was three years younger than the wife and the wife would not be able to draw social security benefits based upon the husband’s earnings until the husband attained age 62. See Cerabona v. Cerabona, 302 A.D.2d 346, 754 N.Y.S.2d 349 (2nd Dept. 2003) (trial court erred in determining maintenance by failing to consider husband’s impending retirement due to health reasons and its effect upon his income). See also Kay v. Kay, 302 A.D.2d 711, 754 N.Y.S.2d 766 (3rd Dept. 2003) (wife in late 50’s granted nondurational maintenance, even though husband could be required to forego his planned retirement at age 63 in order to provide payments; husband to pay maintenance of $4,500 per month until wife attains age 65 and $2,500 per month thereafter); Jensen v. Jensen, 299 A.D.2d 959, 750 N.Y.S.2d 710 (4th Dept. 2002) (54-year-old wife awarded $425 per week maintenance until 59-year-old husband’s retirement; parties had been married 35 years, wife was totally disabled from a work-related injury and her own sources of income were her Social Security disability and workers’ compensation benefits; parties had been living beyond their means and it was not possible to maintain that standard after divorce; accordingly, wife was awarded $425 per week until 59-year-old husband’s retirement, rather than the $598 per week she sought); Marion v. Marion, 300 A.D.2d 369, 751 N.Y.S.2d 516 (2nd Dept. 2002) (56-year-old wife awarded maintenance until her 65th birthday, though amount was reduced on appeal); Taylor v. Taylor, 300 A.D.2d 298, 751 N.Y.S.2d 282 (2nd Dept. 2002) (maintenance to be paid by husband to wife until the later of his attainment of age 65 or his retirement, where marriage was 27 years in duration, wife had ceased working outside the home to raise parties’ children, and wife had medical condition which precluded her from gainful employment).

Where a retired spouse is receiving pension payments, equitable distribution of the payments to a younger, employed spouse may generate a need for maintenance for the retired spouse. Rado v. Rado, 298 A.D.2d 887, 747 N.Y.S.2d 870 (4th Dept. 2002). Alternatively, the court could consider refusing to equitably distribute the pension payments. Tax issues need to be considered. The pension payments are taxable to the retired spouse; the earned income is taxable to the employed spouse. On the other hand, the retired spouse may not deduct the share of the pension payments paid over to the employed spouse; the employed spouse may be able to deduct the maintenance payments paid to the retired spouse. However, the court could order the pension payments to be divided on a net-of-taxes basis, if sufficient information is provided. Likewise, the court could order that the maintenance payment be nondeductible.

In considering the issue of maintenance, the court may take into account the separate property of the parties, as well as any separate property that may be reasonably forthcoming in the future. For example, in Kay v. Kay, 302 A.D.2d 711, 754 N.Y.S.2d 766 (3rd Dept. 2003), the court, in awarding the wife nondurational maintenance, observed that the husband had been awarded substantial separate property and, in addition, would be receiving a substantial payment each year for almost 10 years from his father’s estate; the court recognized that the wife may have foregone retirement investments on her own in the expectation that the numerous inheritances from the husband’s family would insure her financial security). See also Cerabona v. Cerabona, 302 A.D.2d 346, 754 N.Y.S.2d 349 (2nd Dept. 2003) (trial court erred in determining maintenance by failing to consider wife’s interest in tax-sheltered annuity, the proceeds of her father’s estate, and her potential Social Security payments); Garner v. Garner, 307 A.D.2d 510, 761 N.Y.S.2d 414 (3d Dept. 2003), leave to appeal denied, 100 N.Y.2d 516, 769 N.Y.S.2d 203, 801 N.E.2d 424 (2003) (wife denied maintenance where both parties were employed, there were no children, wife was expected to receive master’s degree shortly, and received distributive award).

The granting of a substantial equitable distribution payment may impact a maintenance award. See Chalif v. Chalif, 298 A.D.2d 348, 751 N.Y.S.2d 197 (2nd Dept. 2002) (wife awarded $100,000 per year maintenance for six years; her distributive award exceeded $2,500,000). This is because maintenance and equitable distribution are not two separate and discrete items, but are parts of an integrated and complete financial resolution, which should be designed to suit the parties’ financial situation and their respective reasonable needs. Kennedy v. Kennedy, 256 A.D.2d 1048, 683 N.Y.S.2d 608 (3rd Dept. 1998) (improper to use husband’s distributive award to offset maintenance payments). While an equitable distribution may impact on whether maintenance is awarded at all or is limited by duration, it may also impact upon the amount of a nondurational award of maintenance. Grumet v. Grumet, 37 A.D.3d 534, 829 N.Y.S.2d 682 (2nd Dept. 2007) (award reduced, notwithstanding husband’s representation that he was capable of meeting any award made by the court).

Where the court has limited the amount of maintenance in view of a substantial equitable distribution award, the court may temporarily increase the amount of maintenance in the event that payment of the equitable distribution award is delayed. For example, in Cowles v. Stahmer, 255 A.D.2d 103, 679 N.Y.S.2d 607 (1st Dept. 1998), the trial court, in fixing the amount of permanent maintenance, expected that the wife would have simultaneous access to a large equitable distribution award and the income therefrom. In fact, the husband appealed the judgment and procured a stay of payment of the equitable distribution award. Being mindful that the wife would not receive the level of income and economic security that the judgment had contemplated until the appeal was resolved, the trial court granted an interim increase in maintenance. This determination was sustained by the Appellate Division as an appropriate exercise of discretion. The interim modification allowed by Cowles was a consequence of the equitable distribution award having been stayed on appeal. However, an interim modification should be available whenever a sizable equitable distribution award, counted on by the trial court as a reason for limiting maintenance, is delayed for reasons beyond the dependent spouse’s control. Thus, if the titled spouse fails to transfer the necessary assets, a temporary increase in maintenance, pending the transfer, may be appropriate.

The fact that a spouse has not suffered any reduction or loss of lifetime earnings as a result of the marriage has been cited as a factor to be considered in denying maintenance. Palestra v. Palestra, 300 A.D.2d 288, 751 N.Y.S.2d 509 (2nd Dept. 2002); Calandra v. Calandra, 303 A.D.2d 704, 757 N.Y.S.2d 574 (2nd Dept. 2003).

Where durational maintenance has been awarded, but it develops that the recipient cannot attain economic independence within the time period originally established, either because the time period was not realistic to begin with or a subsequent change in circumstance has occurred, the court may modify the award, such as by extending the period of support or by varying the amount of support. The court may do so, even if the application for modification is made after the time originally fixed for support has expired. However, a hearing may be necessary to establish the parties’ financial circumstances so that an appropriate determination may be made. Sass v. Sass, 276 A.D.2d 42, 716 N.Y.S.2d 686 (2nd Dept. 2000).

In Spencer v. Spencer, 298 A.D.2d 680, 748 N.Y.S.2d 809 (3rd Dept. 2002), the Appellate Division upheld trial court’s post-trial decision to terminate “temporary” maintenance and upheld refusal to impute income based upon husband’s voluntary departure from prior employment. However, Appellate Division granted wife a hearing on change of circumstances, finding husband’s resumption of employment would be sufficient to warrant maintenance where parties had a long-term marriage and wife historically made less than husband did.

Maintenance was denied to a husband where he did not seek maintenance until 10 years after the action was commenced and did not demonstrate any change in his income or standard of living established during the marriage. Heilbut v. Heilbut, 297 A.D.2d 233, 746 N.Y.S.2d 294 (1st Dept. 2002), leave to appeal dismissed in part, denied in part, 99 N.Y.2d 643, 760 N.Y.S.2d 93, 790 N.E.2d 266 (2003).

Maintenance of only one year ordered despite prior lavish lifestyle where husband, an attorney, had sustained serious financial reversals and, under circumstances, court could not accept wife’s contention that, despite her prior employment, she was “under no obligation, other than dire necessity, to work.” Carr v. Carr, 291 A.D.2d 672, 738 N.Y.S.2d 415 (3rd Dept. 2002). Indeed, maintenance awards may be structured to encourage the dependent spouse to become self-supporting. Ciampa v. Ciampa, 47 A.D.3d 745, 850 N.Y.S.2d 190 (2nd Dept. 2008) (not abuse of discretion to set maintenance at $7,000 per month for five years; although wife had not worked as attorney for some ten years, she would need three to five years to return to work in order to earn substantial salary but wife also received equitable distribution award of $4.5 million); Costa v. Costa, 46 A.D.3d 495, 849 N.Y.S.2d 204 (1st Dept. 2007) (maintenance reduced on appeal to $5,000 per month taxable for first five years and $4,000 per month taxable for the next two years; while wife had primary homemaking and child-raising responsibilities during 16-year marriage; the award as reduced reflecting the parties’ educational backgrounds and financial positions and was structured to encourage wife to become self-supporting). Likewise, in Griggs v. Griggs, 44 A.D.3d 710, 844 N.Y.S.2d 351 (2nd Dept. 2007), the appellate court reduced the duration of the maintenance award from eight years to five years, in order to provide the wife with a greater incentive to use her contacts, and her background as a graduate of the Wharton School of Business and extensive banking and finance experience, prepare for and take whatever tests were necessarily to increase her employability.

A 37-year-old wife was awarded nondurational maintenance where she was collecting social security disability payments, was unable to sit for long periods of time, and was incapable of returning to her previous occupation as a legal secretary for the foreseeable future, if at all). Mazzone v. Mazzone, 290 A.D.2d 495, 736 N.Y.S.2d 683 (2nd Dept. 2002). See Harrington v. Harrington, 300 A.D.2d 861, 752 N.Y.S.2d 430 (3rd Dept. 2002) (abuse of discretion to deny wife’s request for maintenance, where wife worked part-time, suffered from a medical condition which made it more difficult for her to balance work and home, marriage was lengthy and wife tempered her career by being both primary caretaker of parties’ six children and a devoted housewife); Acosta v. Acosta, 301 A.D.2d 467, 753 N.Y.S.2d 506 (1st Dept. 2003), leave to appeal denied, 100 N.Y.2d 504, 762 N.Y.S.2d 874, 793 N.E.2d 411 (2003) (rehabilitative maintenance of four years appropriate where parties had been married six years, wife had lost her day care license because the husband did not want her to work, and, wife was custodial parent of parties’ young child; thus, it would not be reasonable to expect wife to support herself in the near term in a lifestyle approximating that she enjoyed during the marriage); Silverman v. Silverman, 304 A.D.2d 41, 756 N.Y.S.2d 14 (1st Dept. 2003) (even though wife continued limited business activities after children were born, she was their primary caregiver and sacrificed her career development for the marriage; wife awarded lifetime maintenance as she could not be expected to achieve an income remotely like the parties’ annual lifestyle); Shai v. Shai, 301 A.D.2d 461, 754 N.Y.S.2d 17 (1st Dept. 2003) (nondurational maintenance awarded to husband, where even though the parties lived modestly during their long-term marriage, husband’s standard of living would fall below the preseparation standard without a maintenance award); Kay v. Kay, 302 A.D.2d 711, 754 N.Y.S.2d 766 (3rd Dept. 2003) (nondurational maintenance awarded where it was unlikely that wife would be self-supporting in the lifestyle to which she had been accustomed during course of 28-year marriage); Sterling v. Sterling, 303 A.D.2d 290, 757 N.Y.S.2d 530 (1st Dept. 2003) (award held inadequate and increased in length, but not in amount, due to marital lifestyle and taxable nature of award). On the other hand, a wife was not entitled to maintenance where, at time of trial she was employed as an assistant teacher for 30 hours per week, was thus self-supporting, and would be receiving full title to marital residence to offset arrears in temporary support. Bittner v. Bittner, 296 A.D.2d 516, 745 N.Y.S.2d 559 (2nd Dept. 2002).

An award of maintenance was extended from five years to 15 years on appeal in light of the documented learning disabilities and emotional disturbances of the parties’ three minor children, as well as the wife’s active role in their schooling, homework, and after-school activities, so that award would allow children to reach 18 years of age and wife would have time to acquire appropriate job skills. Klein v. Klein, 296 A.D.2d 533, 745 N.Y.S.2d 569 (2d Dept. 2002). To the extent that payments for the upkeep of the marital residence, unreimbursed medical expenses, and automobile expenses can be allocated to child support or maintenance, the husband was held entitled to a credit for these payments as againstpendente lite arrears.

In Gorelik v. Gorelik, 303 A.D.2d 553, 757 N.Y.S.2d 67 (2nd Dept. 2003), the wife was awarded maintenance for one year (or less if she remarries), after a four-month marriage, bearing in mind the brevity of the marriage, the wife’s master’s degree in computer science, her good health, and her employment in the computer software field. But see Hendershott v. Hendershott, 299 A.D.2d 880, 750 N.Y.S.2d 210 (4th Dept. 2002) (maintenance denied in view of short duration of marriage and the respective assets and earnings of the parties).

In Calandra v. Calandra, 303 A.D.2d 704, 757 N.Y.S.2d 574 (2nd Dept. 2003), the wife commenced an action for divorce in 1986, at which time she vacated the marital residence. At the time she filed for divorce, she was employed as a director of nursing at $43,000 per year. The wife’s action was dismissed for want of prosecution in 1996, and she commenced a second action in 1998. By that time, the husband’s income had increased substantially. On the other hand, the wife had been involved in an automobile accident, was working part-time, and was in receipt of disability payments and tort settlement proceeds. The appellate court, reversing the trial court, held that the wife was not entitled to any maintenance, on the ground that the wife was clearly self-supporting as of the time of the first action and, while the parties’ lengthy separation did not preclude maintenance as a matter of law, the wife had not been forthright in disclosing her income and assets, had unreported income, and was not in danger of becoming a public charge.

While the fact that the parties have been physically separated for a lengthy time prior to the making of the request for maintenance does not preclude the court from granting that request as a matter of law, that the applicant spouse has been self-supporting during that period is a factor that may lead the court to deny the request as a matter of discretion. See Calandra v. Calandra, 303 A.D.2d 704, 757 N.Y.S.2d 574 (2nd Dept. 2003).

In Ferro v. Ferro, 19 A.D.3d 363, 796 N.Y.S.2d 165 (2nd Dept. 2005), the denial of maintenance to the wife was not abuse of discretion where the husband was awarded custody of the parties’ child, the wife was liable for child support, and the wife failed to demonstrate that her disability prevented her from earning a living as an attorney. See also Herzog v. Herzog, 18 A.D.3d 707, 795 N.Y.S.2d 749 (2nd Dept. 2005), leave to appeal denied, 5 N.Y.3d 711, 806 N.Y.S.2d 161, 840 N.E.2d 130 (2005) (award of 15 years of maintenance reduced to 4 years in view of short duration of marriage); Brzuszkiewicz v. Brzuszkiewicz, 28 A.D.3d 860, 813 N.Y.S.2d 793 (3rd Dept. 2006) (nondurational maintenance to 57 year old wife who had limited earning ability such that her income from her pension and social security after retirement would be less than her current earnings).

When the court awards maintenance, the law determines the circumstances under which payments terminate. Unless the court provides for a determinate period of maintenance, payments are due until either party dies, the supported spouse remarries, or the court modifies the award. These legal principles are stated in the very definition of maintenance given in Section 236, Part B, subdivision 1(a). Remarriage of the supported spouse includes both a ceremonial marriage and a common-law marriage, if valid in the place where contracted. If a remarriage occurs, a subsequent dissolution of the second marriage will not revive the maintenance obligation of the prior spouse. Another terminating event, that is the equivalent of a remarriage, is the wife’s cohabitation with another man, provided that she holds herself out as his wife. See DRL § 248. While the parties may agree to vary the standard set forth in Section 248 for terminating maintenance where the wife both cohabits with another man and holds herself out as his wife, the court may not impose a less stringent requirement in making an maintenance award. Florio v. Florio, 25 A.D.3d 947, 809 N.Y.S.2d 231 (3rd Dept. 2006) (court direction that maintenance cease upon “remarriage or cohabitation with unrelated male” could not be read as permitting termination of maintenance upon cohabitation alone, in the absence of a “holding out”).

The ground rules are different where the maintenance payments are fixed by agreement. Where the parties contract with respect to maintenance, the termination events are those that the parties list in their agreement. Where the parties list several terminating events, their list is generally construed by the courts as being exclusive, even if the omitted events would otherwise be available by operation of law. The parties are free to expand the list of terminating events; they are also free to contract the list.

These principles were applied in Slagsvol v. Schneck, 213 A.D.2d 537, 624 N.Y.S.2d 182 (2nd Dept. 1995). There, the parties’ agreement allowed the husband to reduce his payments when the wife obtained employment. The agreement did not specifically authorize the husband to stop paying when the wife remarried, which she did. While, under these circumstances, the omission of remarriage as a terminating event might alone not be enough to support the conclusion that, as a matter of law, the husband was still liable, what did the husband in was that his attorney warned him, before he signed the agreement, that remarriage should be specifically included. The husband declined to follow that advice, saying it was not necessary and that he trusted the wife.

In Slagsvol, the husband had retained counsel to draft the agreement based upon terms negotiated directly between the parties. There is no indication in the case that the wife had her own counsel. While not stated explicitly in the Appellate Division decision, the court may have had in mind the general principle that contracts are construed against the drafter.

There are situations where the parties may bargain to have maintenance payments continue despite remarriage. For example, in Quaranta v. Quaranta, 212 A.D.2d 683, 622 N.Y.S.2d 778 (2nd Dept. 1995), the wife relinquished all claims to her husband’s pension in exchange for lifetime maintenance payments. The only terminating events listed in the agreement were the deaths of the parties, while it was also stipulated that, if the husband’s pension payments increased, the wife’s maintenance would also be increased. When the wife remarried, the husband sought to be relieved of the maintenance payments, noting that the agreement did not explicitly require him to continue them. The courts denied his application, without hearing, holding that the tenor of the agreement reflected an intent of both parties to continue the maintenance payments no matter the marital status of the wife.

A separation agreement which provides that spousal support is to be paid for life or some other fixed duration manifests an intention that payments are to continue despite a remarriage.Hancher v. Hancher, 31 A.D.3d 1152, 818 N.Y.S.2d 384 (4th Dept. 2006) (where husband agreed to pay maintenance “during the joint lives of the parties” husband not entitled to termination of support payments upon wife’s remarriage).

These cases suggest that, whether the parties intend to continue or discontinue payments upon remarriage of the supported spouse, it is much more effective to specifically state that intent in the agreement. Much second-guessing as to what the intent was and much litigation expense can be avoided by listing the terminating events in the agreement. Also, if particular events are not put on the list, the payor spouse may properly be held to have waived or abandoned any attempt to use non-listed events as a basis for terminating. Whether the parties trust each other or not (and few divorcing couples do), they make a written agreement for the purpose of setting forth the terms of their deal. If the payor spouse does not obtain the inclusion of a particular event on the list of terminating events, he or she must ordinarily live with the consequences.

In the past the appellate courts have discouraged trial courts from including in their judgments provisions for future increases or decreases in the amount of support. The traditional view has been that a judgment should address the conditions that the parties are in at the time the judgment is made, with the parties having the right to seek modification should conditions change. See, e.g., Tumolillo v. Tumolillo, 71 A.D.2d 625, 418 N.Y.S.2d 150 (2nd Dept. 1979), affirmed 51 N.Y.2d 790, 433 N.Y.S.2d 89, 412 N.E.2d 1315 (1980); McClusky v. McClusky, 87 A.D.2d 973, 450 N.Y.S.2d 97 (4th Dept. 1982). However, there are signs that this attitude may be changing. There is at least one appellate case which has affirmed a judgment providing for future cost of living adjustments in the amount of maintenance. Lekutanaj v. Lekutanaj, 234 A.D.2d 429, 651 N.Y.S.2d 154 (2nd Dept. 1996).
 
C236B:36: Post-Divorce Maintenance--The Legislative Factors

The Legislature has identified several specific factors to be considered in determining the amount and duration of maintenance. As originally enacted, there were 9 of these express statutory factors. There are now 11 specific factors set forth in Subdivision 6(a) as a result of 1986 and 2009 changes, and there is an additional factor set forth in Subdivision 6(c). This has caused some renumbering. For example, original Factor 10, which allows the court discretion to consider any additional factors it finds to be just and proper, is now Factor 12. These changes took effect on August 2, 1986. The maintenance factors, which differ to some degree from the equitable distribution factors, are separately discussed.

Factor 1--The court must consider the income and property of the respective parties. Unlike equitable distribution Factor 1, this factor does not contain express time limits. The data should be as current as possible and there seems to be no reason to exclude from consideration property or income increase which occurred between the commencement of the action and the time of trial.

In addition to income, the court should consider the extent of the separate property of each party and the extent of property acquired by each party after the commencement of the action. The court is expressly permitted to consider the marital property distributed to each party in equitable distribution. As with equitable distribution Factor 6, this is a cross-reference designed to assure that the court fully integrates a complete financial resolution.

The implication of Factor 1 is that if each party has sufficient income and property to care for his or her own needs, maintenance should not be awarded but if a party lacks sufficient income and property to care for his or her own needs, maintenance should be considered.

The extent of equitable distribution is a maintenance factor. See Avramis v. Avramis, 245 A.D.2d 585, 664 N.Y.S.2d 885 (3rd Dept. 1997) (no maintenance where wife received substantial assets and, because she played an active role in the parties’ real estate holdings, had numerous business skills); Vainchenker v. Vainchenker, 242 A.D.2d 620, 662 N.Y.S.2d 545, 121 Ed. Law Rep. 288 (2nd Dept. 1997) (maintenance award set aside in view of equitable distribution award, wife’s relative ability to be self-supporting, and other financial considerations). InLove v. Love, 250 A.D.2d 739, 673 N.Y.S.2d 175 (2nd Dept. 1998), the court reduced the duration of the award of maintenance from 11 years to five years, holding that five years was sufficient for the 39-year old wife, who had post-high school job training, to obtain employment, bearing in mind that she received a substantial equitable distribution award. Likewise, in Granade-Bastuck v. Bastuck, 249 A.D.2d 444, 671 N.Y.S.2d 512 (2nd Dept. 1998), the appellate court reduced the amount of maintenance allowed by the trial court and limited the award to four years, where the wife had a separate estate worth $1,200,000, had liquid assets of nearly $1 million at the time of trial, and was granted equitable distribution as well. The wife was also relatively young, highly educated, only one course short of obtaining her teaching certificate, and the parties’ only child was about to enter kindergarten. On these facts, the appellate court concluded that a maintenance award of four years’ duration was sufficient to enable the wife to obtain her teaching credentials, obtain employment, and remain available to the child. See also Robinson v. Robinson, 256 A.D.2d 1011, 682 N.Y.S.2d 292 (3rd Dept. 1998) (no maintenance awarded where wife had ability to be self-supporting and sole ownership of the chief marital asset).

Factor 2--This factor is identical with equitable distribution Factor 2 and was also a consideration under prior alimony law.

A 10-month marriage is clearly a short one. Daniels v. Daniels, 243 A.D.2d 254, 663 N.Y.S.2d 141 (1st Dept. 1997). However, the fact that the marriage is a short one does not preclude an award of maintenance. In Daniels, the court granted the wife 20 months of maintenance, despite the brevity of the marriage, where the wife had retired from her career shortly before the marriage. See also Allen v. Allen, 275 A.D.2d 225, 712 N.Y.S.2d 496 (1st Dept. 2000) (the parties had known each other for 35 years and had a grown son, and wife, at advanced age, left her job to be with wealthy husband, wife was entitled to maintenance even though marriage lasted only four years; court awarded wife, at age 59, $5,000 per month maintenance for five years and $3,500 per month for the balance of her life).

Factor 3--As originally enacted, Factor 3 directed the court to consider the present and future capacity of the needy spouse to be self-supporting. As amended in 1986, the court is to consider the present and future earning capacities of both parties. The original version placed an unfortunate emphasis upon the ability of the needy spouse to become self-sufficient. The statute seemed to ignore the income producing ability, present and future, of the supporting spouse. Further, in focusing in on “self-support”, the statute seemed to discourage awards of maintenance when the needy spouse attained a bare level of self-sufficiency, regardless of the prior standard of living. While the standard of living was a factor and the earning capacity of the payor spouse was always considered, the 1986 legislation seeks to more evenly balance the court’s approach. The court should look to the present and future earning capacities of both parties. The future earning capacities of the parties is determined by assessing the parties’ present abilities, their skills and training, marketplace trends, and such additional education or training as the parties may be obtaining.

A spouse who unjustifiably failed or refused to work during the marriage may not be rewarded by an award of maintenance following divorce. Thus, where the husband did not work through much of the marriage, did not perform household duties, made only minor economic or noneconomic contributions to the marriage, but possessed many skills and a strong educational background, it was held error to require the wife to pay him an award of maintenance. Sade v. Sade, 251 A.D.2d 646, 675 N.Y.S.2d 119 (2nd Dept. 1998).

Factor 4--As originally enacted, Factor 4 required the court to consider the period of time and training that the needy spouse would need to become self-supporting. The implicit assumption was that the needy spouse could become self-supporting, the only question being when that would happen. The Legislature, however, has recognized, and some courts had overlooked, the fact that it is not always possible for a homemaker spouse, after a long term marriage, or with young children present in the home, to be capable of self-support, particularly if the parties’ standard of living is considered. Factor 4 was been recast in 1986, therefore, to break it down into two parts. First, the court must look to whether the party seeking maintenance has the ability to become self-supporting and, then, if such ability is found to exist, consider the period of time and training necessary therefor. The statute makes it plain that the court recognize that not every spouse may presently have the ability to be successful in re-entry to the marketplace. This may be because simply too much time has passed. It may also be that the needy spouse has young children at home and should not be forced to leave them with substitutes during the day.

Factor 5--Factor 5 is whether the party seeking maintenance has lost, or suffered reduction in, lifetime earning capacity as a result of having foregone or delayed education, training, employment, or career opportunities during the marriage. This factor is designed to make sure that, where a homemaker spouse passed up, or deferred, career opportunities during the marriage, the sacrifices entailed be considered in awarding maintenance. The statute properly makes a return to the doctrine of Kay v. Kay, 37 N.Y.2d 632, 376 N.Y.S.2d 443, 339 N.E.2d 143 (1975). There, the Court of Appeals, in a case involving alimony, ruled that where a husband had acquiesced and benefitted from the wife’s role as a homemaker and caretaker for the children for many years, he could not, in order to avoid alimony, seek to force the wife into a different role, at least without proving that the role has economic viability and that the children will not suffer. The Court of Appeals refused to penalize a spouse for remaining at home to care for children and the home. The revised Factor 5 seeks to assure that the court consider what the homemaker spouse lost, in terms of career advancement, by remaining home.

In Treffiletti v. Treffiletti, 252 A.D.2d 635, 675 N.Y.S.2d 192 (3rd Dept. 1998), the appellate court extended a maintenance award to cover the wife through her eligibility for social security where the wife had subordinated her educational and occupational development throughout the marriage in order to raise the children and assist the husband in his career and was incapable of meeting her monthly expenses or maintaining the predivorce lifestyle. It should also be noted that the absence of any lost educational or career opportunities may be a factor in the denial, or limitation, of maintenance. Robinson v. Robinson, 256 A.D.2d 1011, 682 N.Y.S.2d 292 (3rd Dept. 1998).

Factor 6--Factor 6 is the presence of children of the parties in the respective homes of the parties.

The inclusion of the presence of children in the homes of the parties as a factor suggests that, in some cases, the custodial parent should be permitted to remain at home with the children and should not be penalized for working inside the home. The phrase “respective homes” suggests that siblings might have been separated or that there is joint or divided custody.

The inclusion of the presence of children in the homes of the parties as a factor suggests that, in some cases, the custodial parent should be permitted to remain at home with the children and should not be penalized for working inside the home. The phrase “respective homes” suggests that siblings might have been separated or that there is joint or divided custody.

Whether a custodial parent should be awarded maintenance sufficient to permit him or her to remain in the home full-time hinges upon a number of other facts, some of which the court could consider only by resort to the catch-all Factor 12. Is the noncustodial parent possessed of sufficient means to pay such maintenance? How old are the children? What had the parties intended to do when they were still at peace with each other? Are there babysitters available at a reasonable cost? What sort of position and earnings would the custodial parent have? The answer to these questions would tend to indicate whether the custodial parent should or should not be compelled to work outside the home. See Soule v. Soule, 252 A.D.2d 768, 676 N.Y.S.2d 701 (3rd Dept. 1998) (ten years of maintenance allowed to 37-year-old wife, who had custody of 13-year-old daughter and seven-year-old son, and who had demonstrated ability to be retrained); Love v. Love, 250 A.D.2d 739, 673 N.Y.S.2d 175 (2nd Dept. 1998) (five years of maintenance allowed to 39-year-old wife, who had good health and post-high school training, where all four children were of school age and youngest child was 10 years old); see also Love v. Love, 251 A.D.2d 631, 676 N.Y.S.2d 208 (2nd Dept. 1998) (maintenance for 43 year old wife reduced from eight years to five years due, in part to fact that custody of child was placed with husband); Shortis v. Shortis, 274 A.D.2d 880, 711 N.Y.S.2d 578 (3rd Dept. 2000) (where husband had custody of parties’ child and there was no proof that wife was paying any child support, record was held insufficient to support trial court’s award of maintenance to the wife).

Maintenance may also be denied where the child support award places the parents on relatively equal footing. See Gandhi v. Gandhi, 283 A.D.2d 782, 724 N.Y.S.2d 541 (3rd Dept. 2001) (supplementing the wife’s salary with the child support paid by the husband, and taking into account that the husband paying nearly the entire cost of the child’s day care, leaves the parties on an approximately equal financial footing).

Factor 7--The court is to consider the tax consequences that a maintenance award would have on each party. Periodic support payments made pursuant to a court judgment or decree of separation agreement would be deductible from the payor’s gross income and would constitute taxable income to the recipient. Internal Revenue Code, Section 71. Depending upon the payor spouse’s tax bracket, at least a portion of maintenance paid and deducted, in effect, is absorbed by the government. Thus, the payor spouse’s net cost is not as high as it may appear. On the other hand, the recipient spouse must pay taxes on maintenance received but whether the net value is significantly lower depends on the amount of the maintenance and the amount of any other taxable income.

It is now not uncommon to see charts and displays prepared which show the various tax combinations and permutations of various types of awards.

The issue of tax impacts is considered further in Practice Commentary C236B:41.

Factor 8--The court is directed to consider the contributions of the maintenance-seeking spouse as a spouse, parent, wage earner, homemaker and career enhancer. As with equitable distribution Factor 7, the intent is to make certain that the contributions of a spouse, even non-economic ones, are taken into account when that spouse seeks a support award.

Factor 9--Under Factor 9, the court is to consider wasteful dissipations of assets. Under the original version, the court could consider the wasteful dissipation of “family assets”. As revised in 1986, the statute calls for consideration of wasteful dissipations of “marital property”. Seemingly, this revision has the effect of precluding the court from considering the wasteful dissipation of separate property, held either by the needy spouse or by the wealthier spouse. However, even a waste of separate property may have its impact on maintenance and may be considered under Factor 12 (former Factor 10), which allows the court to consider such additional factors it finds appropriate.

What is and what is not a “wasteful dissipation” will have to be defined judicially. Extensive gambling losses, clothes and gifts for a new love, large bar tabs, all may be indicative of a “wasteful dissipation”. An occasional extravagance probably should not be regarded as a wasteful dissipation. Indeed, whether family assets have been wasted may be a relative concept and the standard of living of the parties may be a factor. In a family where the assets were plentiful and each spouse bought expensive clothes, the purchase of a fur coat or elegant tuxedo may not be wasteful; in other families it could be wasteful. It will be important to separate true waste from mere differences over spending priorities between people who no longer agree. SeeWillis v. Willis, 107 A.D.2d 867, 484 N.Y.S.2d 309 (3rd Dept. 1985).

Factor 10--The court is to consider, as a statutory maintenance factor, any transfer or encumbrance made in contemplation of a marriage without fair consideration. This factor deals with the problem of a party who seeks to place assets out of his or her control in contemplation of an action in which equitable distribution will be made. For the court to actually set aside the transfer, the court would need jurisdiction over the transferee and a proper basis for doing so, such as proof satisfying the requirements of the Debtor and Creditor Law. Where the transfer cannot be undone, this new statutory factor allows the court to award additional maintenance to the victimized spouse.

Factor 11-The Legislature in 2009 made the loss of health insurance upon dissolution of marriage a maintenance factor. (L.2009, ch. 229, effective as to actions commenced on or after September 16, 2009). While the matrimonial court has the authority to order a spouse to purchase or maintain health and hospital insurance for the other spouse or the children, the fact is that where only one spouse works outside the home and has access to group coverage, the other spouse is mostly likely covered as a dependent and will lose dependent status upon divorce. The Legislature has separately added Section 255 to the Domestic Relations Law to require the court to notify the parties that, once a judgment has been signed, a party may no longer be eligible for coverage under the other spouse’s plan. (L.2009, ch. 143, which also repeals a prior statutory effort at such notification, Section 177; the requirements of Section 255 are discussed in the Supplementary Practice Commentary to that Section).

While the non-employed spouse may obtain continuation coverage through the federal COBRA statute for up to 36 months, that coverage is costly. Moreover, the COBRA continuation coverage ends after 36 months. The Assembly Memorandum in Support notes that the loss of health insurance can be financially devastating. Allowing the court to take the financial consequences of loss of health insurance (either immediately or deferred for three years) into property distribution (and maintenance) permits the court to adjust the property distribution and maintenance awards to account for the additional expense.

While the statute applies only in cases commenced after its effective date, the courts could consider loss of health insurance upon divorce in earlier commenced cases under the “wild card” factor.

The Religious Divorce Factor-DRL Section 253 seeks to provide a remedy for the situation where a Jewish husband refuses to sign religious documents needed for a religious divorce. Section 253 is designed to compel such husbands into voluntarily agreeing to remove “barriers to remarriage” or else be precluded from obtaining a civil divorce judgment. For discussion of the workings of the statute, see the Practice Commentaries accompanying DRL § 253.

Paragraph (h) of subdivision 5 of Part B of Section 236 requires the court to consider, where appropriate, the effect that a barrier to remarriage would have on the various legislative factors. While the barrier to remarriage issue is not a direct legislative factor on maintenance, it is to be considered as a factor which may influence the statutory factors.
 
C236B:37: Post-Divorce Maintenance and Marital Fault

Maintenance Factor 12 (originally Factor 10) permits the court to consider any other factor the court finds to be just and proper. As with equitable distribution, the inclusion of this discretionary factor is explained, in large part, by the Legislature’s failure to reach accord as to whether fault should be a factor and its decision to leave the matter with the courts.

With regard to equitable distribution, the courts have ruled that, unless the misconduct is so egregious as to shock the conscience of the court, marital fault is not to be a factor in equitable distribution. O’Brien v. O’Brien, 66 N.Y.2d 576, 498 N.Y.S.2d 743, 489 N.E.2d 712 (1985); Blickstein v. Blickstein, 99 A.D.2d 287, 472 N.Y.S.2d 110 (2nd Dept. 1984). However, the Court of Appeals, in its O’Brien decision, did not rule on the role of fault in maintenance determinations.

Fault is generally not an equitable distribution factor since property distribution is based on contributions made to the marriage during marriage. Maintenance stands on a different footing since maintenance payments continue after the marriage is over. Where maintenance is concerned, there may be injustice, in some cases, in allowing the guilty party in a fault divorce to profit by reliance upon the marriage status to obtain support from a former spouse. Likewise, it may be harsh upon a victimized spouse to compel the payment of support, though the marriage is terminated, to a spouse who committed marital fault.

Recognizing the difference between maintenance and property distribution, the court may allow marital fault to be considered as one of several factors in a maintenance determination. Stevens v. Stevens, 107 A.D.2d 987, 484 N.Y.S.2d 708 (3rd Dept. 1985); Nolan v. Nolan, 107 A.D.2d 190, 486 N.Y.S.2d 708 (3rd Dept. 1985). Thus, in one case, Garner v. Garner, 307 A.D.2d 510, 761 N.Y.S.2d 414 (3rd Dept. 2003), leave to appeal denied, 100 N.Y.2d 516, 769 N.Y.S.2d 203, 801 N.E.2d 424 (2003), it was held that marital fault was properly considered in denying maintenance; the wife was living with another man since shortly after abandoning the husband. Another illustration is Holmes v. Holmes, 25 A.D.3d 931, 807 N.Y.S.2d 217 (3rd Dept. 2006) where maintenance was denied to the wife, after a six year, childless marriage, where the wife had engaged in alcohol and drug abuse, committed assaultive behavior towards the husband, expended marital funds towards her habits, and there was no evidence that she gave up any educational or employment opportunities due to the marriage.

On the other hand, the First Department has held that fault is not generally a factor in maintenance. Wilson v. Wilson, 101 A.D.2d 536, 476 N.Y.S.2d 120 (1st Dept. 1986), appeal dismissed, 63 N.Y.2d 768, 481 N.Y.S.2d 688, 471 N.E.2d 460, appeal denied 64 N.Y.2d 607, 487 N.Y.S.2d 1027, 476 N.E.2d 1006. However, even where marital fault is regarded as a factor, marital fault is not preclusive; it is, at best, one of several factors that may be considered. Maintenance may be awarded despite the fault of the needy spouse. Maloney v. Maloney, 114 A.D.2d 440, 494 N.Y.S.2d 356 (2nd Dept. 1985).

To be considered the marital fault must have arisen prior to the commencement of the action. While sexual acts by a spouse with a third party that take place only after the spouses had physically separated and during the pendency of divorce proceedings are still adulterous, such acts ordinarily should not be considered. SeeMelnik v. Melnik, 118 A.D.2d 902, 499 N.Y.S.2d 470 (3rd Dept. 1986). To consider such post-commencement events may lead to an unfortunate double standard, i.e., the payor spouse will not be condemned for such acts but the needy spouse would be financially penalized. Nor should fault be considered as a maintenance factor where there are mitigating circumstances. Thus, in Bara v. Bara, 115 A.D.2d 628, 496 N.Y.S.2d 287 (2nd Dept. 1985), appeal dismissed, 67 N.Y.2d 609, 504 N.Y.S.2d 1023, 495 N.E.2d 356, appeal dismissed, 68 N.Y.2d 664, 505 N.Y.S.2d 1028, 496 N.E.2d 241, the wife’s marital fault was, properly, not considered due to her documented emotional and psychological problems.

Economic misconduct of both the payor and the payee spouses may be properly considered. Indeed, the statute expressly requires consideration for wasteful dissipation of marital property. See alsoStevens v. Stevens, supra.
 
C236B:38: Post-Divorce Maintenance--The Use of Discretion

Under DRL § 236, Part B, subdivision 6(a), the court is given broad discretion to determine whether maintenance should be awarded at all, and if so, how much and for how long. The Legislature has provided a more comprehensive list of factors to be considered than was available under the prior statute. To that extent, it may be said that discretion has been curtailed.

It remains undeniable, however, that the court has the discretion to determine how much weight, if any, should be given to any specific factor. As in the equitable distribution subdivision, the court is required to set forth the factors considered and the reasons for the conclusion in its decision. Part B, subd. 6(b).

The cases generally support the view that the amount and duration of maintenance is within the sound discretion of the trial court. See, e.g., Holterman v. Holterman, 307 A.D.2d 442, 762 N.Y.S.2d 152 (3rd Dept. 2003), affirmed, 3 N.Y.3d 1, 781 N.Y.S.2d 458, 814 N.E.2d 765 (2004) (nondurational maintenance granted in view of 19-year marriage in which wife sacrificed her career and will be unable to achieve reasonable parity to the marital standard of living with her own employment), Wortman v. Wortman, 11 A.D.3d 604, 783 N.Y.S.2d 631 (2nd Dept. 2004) (nondurational maintenance to former wife of highly successful physician earning over $1 million per year); Garner v. Garner, 307 A.D.2d 510, 761 N.Y.S.2d 414 (3rd Dept. 2003), leave to appeal denied, 100 N.Y.2d 516, 769 N.Y.S.2d 203, 801 N.E.2d 424 (2003); Kay v. Kay, 302 A.D.2d 711, 754 N.Y.S.2d 766 (3rd Dept. 2003) (nondurational maintenance); Bell v. Bell, 277 A.D.2d 411, 716 N.Y.S.2d 717 (2nd Dept. 2000) (award for one year); Lombardo v. Lombardo, 255 A.D.2d 653, 680 N.Y.S.2d 270 (3rd Dept. 1998); McGarrity v. McGarrity, 211 A.D.2d 669, 622 N.Y.S.2d 521 (2nd Dept. 1995); Liadis v. Liadis, 207 A.D.2d 331, 615 N.Y.S.2d 409 (2nd Dept. 1994); Petrie v. Petrie, 124 A.D.2d 449, 507 N.Y.S.2d 550 (3rd Dept. 1986); but see Nee v. Nee, 240 A.D.2d 478, 658 N.Y.S.2d 440 (2nd Dept. 1997); Grenier v. Grenier, 210 A.D.2d 557, 620 N.Y.S.2d 139 (3rd Dept. 1994).
 
C236B:39: Effective Date of Post-Divorce Maintenance and Temporary Maintenance

Pursuant to Subdivision 6(a) of Part B of DRL Section 236, awards of maintenance and an award of temporary maintenance are to be effective “as of the date of the application therefor”. It is suggested that the date of the application is the date on which it is made and not the date which appears on the papers. To go by the date of the papers might be unfair if the papers are not served promptly.

In the case of maintenance, the application should be considered made when the summons with maintenance identified as ancillary relief requested (see DRL § 232) is filed or when the complaint, containing a prayer for maintenance is filed. SeeBurns v. Burns, 84 N.Y.2d 369, 618 N.Y.S.2d 761, 643 N.E.2d 80 (1994) (in actions commenced by service, application was deemed made when process was served and action commenced). In the case of a defendant who received maintenance, the application should be considered made when the answer, containing a prayer for maintenance, is served. Lapham v. Ruflin, 241 A.D.2d 969, 661 N.Y.S.2d 373 (4th Dept. 1997); see alsoFrank v. Frank, 242 A.D.2d 892, 662 N.Y.S.2d 888 (4th Dept. 1997).

An application for temporary maintenance should be considered made when the motion papers are served.Accord, Khalily v. Khalily, 99 A.D.2d 482, 470 N.Y.S.2d 424 (2nd Dept. 1984).

If a maintenance award is made, and it is for more money than was being paid as temporary maintenance or if no temporary maintenance was paid at all, the needy spouse has the right to collect the full amount due, retroactive to the date of the application for maintenance. If temporary maintenance has been paid, the payor spouse may owe support for the time before the temporary order was made and then may owe the differences between the temporary maintenance and maintenance figures. For example, suppose an action is started by W on November 1, 2010, and she files a summons and complaint requesting maintenance; on December 1, 2010, she serves a motion for temporary maintenance; on February 1, 2011, the Court awards $200 per week temporary maintenance and on July 1, 2011, the Court awards $400 per week maintenance. The law would be applied as follows: the temporary order made on February 1, 2011, is retroactive to December 1, 2010, the day the application was made. The $400 per week award made on July 1, 2011 would be retroactive to November 1, 2010 (the day the application was made) but H should get credit for the $200 per week paid as of December 1, 2000.

The court is empowered to direct that the payor spouse pay any “retroactive amount” of maintenance in one payment or in periodic payments. Whether the court would permit the payor spouse to stretch out his or her obligations would depend upon the amounts involved and the assets and needs of both parties.

The law is based upon the premise that maintenance would be higher than temporary maintenance. What happens if the reverse occurs. Under former law, a husband generally could not recoup alimony he paid pursuant to an order or judgment found to be excessive. The rationale was that alimony being support, the wife should not be deprived of the full amount necessary for support. While the new statute makes any direction, presumably even a lesser direction, effective as of the date of the application, it does not address the issue of recoupment. While recoupment per se is not recognized,Rodgers v. Rodgers, 98 A.D.2d 386, 470 N.Y.S.2d 401 (2nd Dept. 1983), appeal dismissed 62 N.Y.2d 646, the extra income the recipient spouse received, or property thereby obtained, may be taken into account, in assessing the actual amount of the reduced award and the duration of the award. See subdivision 6(a), Factors (1), (4), (12). Moreover, the excess maintenance may be considered in equitable distribution. In Johnson v. Chapin, 12 N.Y.3d 461, 881 N.Y.S.2d 373, 909 N.E.2d 66 (2009), the Court of Appeals held that where a pendente lite maintenance award is excessive, the matrimonial court may, in its final decision, grant a credit, in the property distribution, to the obligor spouse for the amount by which the temporary maintenance paid exceeded the amount of maintenance that would have been paid under the final award. In Johnson, the husband’s income, for temporary support purposes, was imputed to be substantially higher than what it actually was, resulting a higher temporary maintenance award than his actual income would have warranted. On the other hand, the Court held in Johnson that it would be contrary to public policy to give the husband a similar credit for the portion of the excessive temporary award that was for child support.

In Harness v. Harness, 99 A.D.2d 658, 472 N.Y.S.2d 234 (4th Dept. 1984), the trial court awarded plaintiff maintenance retroactively to the parties’ separation, which separation preceded the commencement of the action. The Appellate Division modified, holding that the award should have been retroactive to the date of commencement of the action, as the plaintiff requested maintenance in her summons and complaint.

Rodgers v. Rodgers, 98 A.D.2d 386, 470 N.Y.S.2d 401 (2nd Dept. 1983), appeal dismissed 62 N.Y.2d 646, involved a plaintiff wife who was awarded maintenance but who did not request such relief in her original divorce complaint. The first time the wife requested maintenance of any sort was when she applied for temporary maintenance. The court held that the earliest date to which the permanent award could be retroactive was the date of her temporary maintenance application. 470 N.Y.S.2d at 404 n. 1. The Rodgers court also noted that while retroactivity was a discretionary matter prior to the legislative amendment that discretion is replaced by automatic retroactivity within the statutory mandate. 470 N.Y.S.2d at 404 n. 2. InEvangelista v. Evangelista, 111 A.D.2d 904, 491 N.Y.S.2d 30 (2nd Dept. 1985), the court directed that the award of maintenance, after trial, be made retroactive to the date that the plaintiff wife served her summons and complaint on the defendant husband.

Rodgers, Evangelista, and Harness involved plaintiffs who were awarded maintenance. That a defendant who is awarded permanent maintenance should receive an award retroactive to the assertion of a maintenance demand in the answer is supported by Lapham v. Ruflin, 241 A.D.2d 969, 661 N.Y.S.2d 373 (4th Dept. 1997).

For retroactivity purposes, it is important for courts, when making both permanent and interim awards, to specify, when both child support and maintenance are awarded, which portion of the award is attributable to each item. Not only is this important for tax purposes, in looking back for retroactivity purposes, it would seem that the proper comparison is between individual items of the award, not the totals of the two. In other words, to assess retroactivity, the difference between child supportpendente lite and permanent child support would have to be considered. It would seem that, if maintenance and child support are awarded pendente lite, the retroactivity of maintenance will be measured by contrasting the two maintenance components.

Where a fragmented award was made pendente lite, i.e., in addition to flat sums awarded periodically, the payor is to make third party payments such as for home mortgage and realty tax expenses. For retroactivity purposes, the amount of the third party payments should be apportioned as between maintenance and child support so that full credit can be given to the payor when retroactivity is assessed.

These issues have dealt with the commencement of support. On the other end of the scale, termination, there has likewise been a significant decision. Prior to equitable distribution, it was well-settled that a dismissal of the action terminates temporary maintenance. While that principle is not impaired by equitable distribution, the form that the dismissal takes must be closely examined. In Kapchan v. Kapchan, 104 A.D.2d 358, 478 N.Y.S.2d 689 (2nd Dept. 1984), when the wife’s complaint was originally dismissed for failure to state a cause of action, the husband apparently took the position that his obligation under a pendente lite award ceased. The dismissal was taken up to the Appellate Division, which granted leave to replead. She repleaded; the amended pleading was found faulty by Special Term but was reinstated by the Appellate Division on a second appeal. The court also remarked that, since it had granted leave to replead on the first appeal, the action had not been dismissed “outright”. Indeed, no judgment of dismissal (as opposed to an order granting a motion to dismiss) was ever made. Thus, when the amended pleading was sustained by the Appellate Division, also sustained was the wife’s right to enforce the pendente lite order.
 
C236B:40: Temporary Maintenance

In 2010, the Legislature added a new subdivision 5-a to regulate the determination of temporary maintenance awards. Under the 2010 statute, the court is to apply certain legislative guidelines to determine the amount of interim maintenance and the use of the legislative formula is to be deemed presumptively correct, though the court may vary the award upon finding that the presumptive award is unjust or inappropriate, based on legislative factors. This statute takes effect October 12, 2010.

This development took place too close to the publication of this volume to be addressed at length and the reader is advised to look for further elucidation in subsequent annual updates.

Prior to the 2010 statutory change, temporary maintenance served the same function as temporary alimony served under prior law. It was designed to allow the needy spouse funds on which to live, in keeping with the marital standard of living, while the case is making its way through the courts. Temporary maintenance was available to insure that the needy spouse is provided with sufficient funds to meet his or her reasonable needs pending trial. Belfiglio v. Belfiglio, 99 A.D.2d 462, 469 N.Y.S.2d 978 (2nd Dept. 1984); cf. Braga v. Braga, 82 A.D.2d 727, 439 N.Y.S.2d 381 (1st Dept. 1981). A predominant consideration is the financial need of the movant. See, e.g., Jorgensen v. Jorgensen, 86 A.D.2d 861, 447 N.Y.S.2d 318 (2nd Dept. 1982); Kaltenbach v. Kaltenbach, 88 A.D.2d 582, 449 N.Y.S.2d 797 (2nd Dept. 1982). But the court was required to make an accommodation between the reasonable needs of the spouse making the application and the financial ability of the other spouse to provide for those needs. Stern v. Stern, 106 A.D.2d 631, 483 N.Y.S.2d 113 (2nd Dept. 1984). The marital standard of living was relevant but, in the end, the court had to reach an accommodation between the means of the supporting spouse and the reasonable needs of the dependent spouse. Van Ess v. Van Ess, 100 A.D.2d 848, 474 N.Y.S.2d 90 (2nd Dept. 1984).

The court did not need to consider each of the statutory factors applicable to maintenance determinations when considering temporary maintenance. Indeed, many of those factors would be difficult, if not impossible, to assess on conflicting affidavits. The court could consider such of the factors as apply but such consideration was not mandatory. E.g., Liss v. Liss, 87 A.D.2d 681, 448 N.Y.S.2d 814 (3rd Dept. 1982); see also Berley v. Berley, 97 A.D.2d 726, 468 N.Y.S.2d 879 (1st Dept. 1983); Belfiglio v. Belfiglio, 99 A.D.2d 462, 469 N.Y.S.2d 978 (2nd Dept. 1984).

Where an antenuptial agreement is in effect, any temporary maintenance award must be in accordance with the terms of the agreement. Peerce v. Peerce, 88 A.D.2d 832, 451 N.Y.S.2d 139 (1st Dept. 1982). Indeed, temporary maintenance is barred if a separation agreement is in effect and is being complied with.

As under pre-equitable distribution principles, the general rule was that the appropriate remedy for any claimed inequity in temporary maintenance is a prompt trial where the facts may be examined in more detail and a more accurate appraisal of the situations of the parties obtained. SeeSayer v. Sayer, 130 A.D.2d 407, 515 N.Y.S.2d 444 (1st Dept. 1987).
 
C236B:41: Tax Considerations of Maintenance Awards

An important consideration in the determination of applications for maintenance and child support is the federal income tax treatment of spousal and child support. The tax consequences to each party of a maintenance award is a factor which, by express statutory provision, must be considered in passing upon an application for spousal support. DRL § 236, Part B, subd. 6(a) (factor 7). The tax impact that results from spousal support is different from the impact that flows from child support and, accordingly, awards of spousal and child support should not be lumped together but, instead, the amounts awarded for each should be separately allocated. King v. King, 63 A.D.2d 669, 404 N.Y.S.2d 683 (2nd Dept. 1978); Goldberger v. Goldberger, 78 A.D.2d 547, 432 N.Y.S.2d 31 (2nd Dept. 1980).

Payments made for spousal support, if the qualifications imposed by the Internal Revenue Code are met, are deductible by the payor spouse and taxable to the payee spouse. 26 U.S.C.A. §§ 71 (subd. a), 215. However, payments made for the support of minor children are not taxable to the payee and are not deductible by the payor. 26 U.S.C.A. §§ 71 (subd. c) (as amended), 215. It should be borne in mind that, while the federal income tax provisions do not override state substantive family law, compliance with the federal tax provisions are necessary in order to obtain the appropriate tax treatment.

Payments made for spousal support are generally made tax deductible by the payor and taxable to the payee. However, the Internal Revenue Code permits the parties by agreement, or the court in an order, to designate the payments as not deductible by the payor and not taxable to the payee. See 26 U.S.C.A. § 71(b)(1)(B). Whether to make the payments deductible or not deductible is up to the sound discretion of the court. SeeLowe v. Lowe, 211 A.D.2d 595, 622 N.Y.S.2d 26 (1st Dept. 1995). However, the Appellate Division, Second Department, has stated that, absent a clear rationale, the trial court should follow the “norm” of maintenance being taxable to the recipient and tax deductible by the payor. Grumet v. Grumet, 37 A.D.3d 534, 829 N.Y.S.2d 682 (2nd Dept. 2007).

Whether the payments are deductible or not may, in a sense, be a distinction without a difference. If the court makes the payments deductible by the payor and income to the payee, the court should consider that the payments will not cost the payor as much because of the deductibility, and conversely that the net to the payee will be less than the gross. On the other hand, if the court eliminates deductibility, it should recognize that the cost to the payor has been increased and the net to the payee has also been increased. In other words, if the court makes the award deductible, it would likely have made the award less if it had made it nondeductible. The converse is also true, if the court makes the award non deductible, it would have likely made it higher if it had been deductible.

The court should be sensitive to the parties’ potential use of available deductions and exemptions. If the payee spouse can deduct home mortgage interest and real estate taxes, and has little earned income, it would be a waste of the parties’ resources to make maintenance nondeductible since the tax burden on the payor has been unnecessarily increased.
 
C236B:42: Child Support and Tax Implications of Child Support

Subdivision 7 of Part B of DRL § 236 mandates the court to order either or both parents to pay child support or temporary child support either in a matrimonial action (see Part B, subd. 2), or in an independent action for child support. The court is to make its award “as provided” in Section 240 of the Domestic Relations Law. Therefore, the discussion of child support is contained in the Practice Commentaries to that statute and in Chapter 16 of Scheinkman, New York Law of Domestic Relations (West 2nd Ed. 2009).

Under the Internal Revenue Code, a personal income tax exemption may be claimed for dependent children. Where the parents of a child are divorced or legally separated, or live apart from each other for more than 6 months of the calendar year, the child dependency exemption may be claimed only by the parent who had custody of the child for the greater portion of the year. However, the non-custodial parent may claim the exemption if the custodial parent signs a written declaration, on an Internal Revenue Service form, to the effect that the custodial parent will not claim the exemption for the year in question. 26 U.S.C.A. § 152 (subd. e, par. 2).

Where the court orders the non-custodial parent to pay child support, the court might consider whether the custodial parent, as condition for the child support, should be required to assign the right to claim the child dependency exemption to the non-custodial parent. While the court noted that the federal income law allows the custodial parent to claim the exemption, unless he or she releases it, (Bennett v. Bennett, 140 A.D.2d 400, 528 N.Y.S.2d 103 (2nd Dept. 1988)), the courts have the authority to compel the division of the exemptions. See, e.g., Burns v. Burns, 193 A.D.2d 1104, 598 N.Y.S.2d 888 (4th Dept. 5/28/93), modified on other grounds 84 N.Y.2d 369, 618 N.Y.S.2d 761 (1994); Block v. Block, 258 A.D.2d 324, 685 N.Y.S.2d 443 (1st Dept. 1999); Frei v. Pearson, 244 A.D.2d 454, 664 N.Y.S.2d 349 (2nd Dept. 1997); Harris v. Harris, 242 A.D.2d 558, 662 N.Y.S.2d 532 (2nd Dept. 1997); Welch v. Welch, 233 A.D.2d 921, 649 N.Y.S.2d 560 (4th Dept. 1996); Iwahara v. Iwahara, 226 A.D.2d 346, 640 N.Y.S.2d 217 (2nd Dept. 1996).

If the court believes it proper to allow the non-custodial parent to claim the child dependency exemption, it may achieve that result either ordering a party to release the exemption or by a more subtle, indirect approach. Instead of ordering the custodial parent to execute the release document, it might offer the custodial parent a choice: execute the document or else face a modification of the award. If the custodial parent refuses to execute the form, the court could consider modifying the child support award, or even any maintenance award, in order to take into account the additional tax burden thereby imposed upon the non-custodial parent and the additional tax saving thereby gained by the custodial parent. This assumes, of course, that the court made the child support and maintenance awards in the belief that the non-custodial parent would have the child dependency exemption. If the court made the awards under the assumption that the custodial parent would have the exemption, there would be no occasion for a modification.
 
C236B:43: Health and Life Insurance

In the first sentence of DRL § 236, Part B, subdivision 8(a), the court is empowered to direct one spouse to purchase, maintain or assign an insurance policy covering “health and hospital care and related services” for the other spouse or the children for as long as maintenance, child support or a distributive award is being paid.

Medical insurance coverage is vital in this age of expensive medical care. Moreover, coverage on a “group” plan, for group members and dependents, is frequently available through employment, through unions and professional associations and other organizations. Under Section 240 the court may require a parent who has access to health insurance to provide such insurance and, if a parent does not have access such health insurance, the court, within certain parameters, may require that the parent obtain coverage for a child. DRL § 236, Part B, subdivision 4 has been amended to require disclosure of group health insurance benefit information.

Section 255 of the Domestic Relations Law requires that the parties be informed that a person may not be eligible for health insurance coverage in the event of a divorce. This statute replaces an earlier effort, Section 177. The The requirements of Section 255 are discussed in the Practice Commentary to that Section.

Subdivision 8(a) also empowers the court to provide a policy of life insurance on the life of either spouse (but usually to be the life of the support provided) with the other spouse or the children designated beneficiaries. The beneficiary’s interest terminates when the support-provider’s obligation to pay maintenance, child support or distributive award ceases or when the beneficiary (if the former wife) remarries or predeceases the insured.

In Hartog v. Hartog, 85 N.Y.2d 36, 623 N.Y.S.2d 537, 647 N.E.2d 749 (1995), the Court of Appeals resolved an ambiguity in the statutory language concerning the court’s power to order a spouse to maintain life insurance for the protection of the other spouse. The statute, while empowering the courts to require a party to maintain life insurance, contains a proviso that the beneficiary’s interest “shall cease upon the termination” of the payor spouse’s obligation to pay support. In Hartog, the husband argued that, upon his death, his obligation to pay maintenance would end as a matter of law, and therefore, the court could not order him to provide life insurance to cover any amount of maintenance that would be due after his death. He asserted that the only life insurance that could be directed would be to secure payment of any amounts that were unpaid at his death.

While this argument would be consistent with the literal wording of the statute, it is doubtful that the Legislature intended this result. The Court of Appeals held that despite the wording of the statute, life insurance may be ordered to cover post-death obligations.

However, Hartog also touched another key point. The record did not indicate that the husband had any insurance, and because he was seriously ill, he was uninsurable. (In fact, the husband died shortly after the decision by the Court of Appeals). The trial court, on these facts, held that if the husband died without having the requisite insurance, the wife would be entitled to a lien on his estate in the amount of the insurance that should have been provided. The Court of Appeals agreed with the Appellate Division that the courts do not have the authority to create a lien on the estate of the payor spouse as a remedy for the failure to maintain life insurance.

As a result, where life insurance is directed, the spouse who is to be protected must keep a watchful eye to assure that the policy is procured and maintained. In separation agreements, it is common for life insurance provisions to contain clauses requiring the insured spouse to provide copies of documents to the beneficiary spouse. The court, to implement the authority to require life insurance, should have the ability to require the obligor spouse to keep the beneficiary spouse informed about the status of the policy and to provide copies of notices and payments. The court should also not hesitate to use its contempt powers to make sure that obligor spouses keep up the insurance, since the court may not create a lien in the event of noncompliance.

Hartog does not prevent an obligor spouse from agreeing that lack of insurance will create a lien on his or her estate. It holds that the courts may not impose such a lien. Since there may not be any financial remedy for a default at time of death in a judicially created insurance obligation, it is imperative that beneficiary spouses monitor all policies carefully.

To protect beneficiaries, the court should consider not just requiring that there be insurance for them, but ordering the assignment of ownership of the policy to them. As owners of the policy, the beneficiaries would be better positioned to receive notices from the insurers, keep track of payments, and make payments themselves rather than have the policies lapse. It would be preferable for beneficiaries to pay premiums, and chase the obligor for non-payment, then to lose the insurance altogether.

It also needs to be pointed out that whether to order life insurance, and how much, is discretionary with the court. Burns v. Burns, 193 A.D.2d 1104, 598 N.Y.S.2d 888 (4th Dept. 1993),modified on other grounds, 84 N.Y.2d 369, 618 N.Y.S.2d 761, 643 N.E.2d 80 (1994); Guneratne v. Guneratne, 214 A.D.2d 871, 625 N.Y.S.2d 354 (3rd Dept. 1995); Grenier v. Grenier, 210 A.D.2d 557, 620 N.Y.S.2d 139 (3rd Dept. 1994). However, the amount to be provided should be commensurate with the amount and duration of the support obligation. Penna v. Penna, 29 A.D.3d 970, 817 N.Y.S.2d 313 (2nd Dept. 2006) (where wife’s maintenance was end at her attainment of age 66, amount of life insurance should be equal to the total amount of maintenance to be paid until wife’s attains such age; appellate court, which reduced the amount of life insurance ordered by trial court, did not provide for reduction in life insurance over the years to account for payments made). The policy should be a declining term policy that permits reduction in the amount of benefits by the amount of support actually paid. See Matter of Anonymous v. Anonymous, 31 A.D.3d 955, 819 N.Y.S.2d 588 (3rd Dept. 2006).

A copy of the court order is to be served, by registered mail, on the home office of the insurer specifying the name and mailing address of the spouse or children. However, the failure to serve the insurer does not affect the validity of the order. DRL § 236, Part B, subd. 8. The purpose of this statute is to allow the beneficiary spouse to place the insurer on notice of the court order.

Under prior law, the court could not direct the husband to presently provide for support of his wife and children after his death by providing a life insurance policy. The court could order that an existing policy be assigned but then the wife would have to pay the premiums. Rosenberg v. Rosenberg, 42 A.D.2d 590, 345 N.Y.S.2d 73 (2nd Dept. 1973).

The power to compel the provision of life insurance provides an important protection since a spouse’s obligations for maintenance and child support terminate upon death. Life insurance insures that spouse and children will continue to receive support. The amount of insurance should be sufficient to provide substantial protection for spouse and children.
 
C236B:44: Form of the Award and Denial of Matrimonial Relief

The provisions of subdivision 8(b) and (c) of Part B of DRL § 236 are substantively similar to, and were taken from, the provisions of Part A, subdivision 1. Thus, the court has the authority to make a “fragmented” award, whereby the payor spouse is directed to make payments directly to the payee spouse and payments to third parties, such as the mortgagee bank, the real property tax collector, and utility companies. However, where a fragmented award is made, the court should take care not to impose open-ended obligations, i.e., obligations with no financial ceiling. SeeTroiano v. Troiano, 87 A.D.2d 588, 447 N.Y.S.2d 753 (2nd Dept. 1982). There, the court struck out provisions calling for the husband to pay the carrying charges on the former marital residence and to pay for extraordinary medical or dental expenses incurred by the wife or the children. The spousal support payments, however, were increased to provide the payee spouse with funds to pay the carrying charges and she was allowed, if any extraordinary medical or dental expenses are incurred, to make application to recover those expenses from the payor spouse. Likewise, the payee, since she was awarded exclusive occupancy of the residence, could apply to recover any expenses incurred for extraordinary repairs to the house. However, where the payee is afforded title to the property, it would seem unwarranted to compel the payor, who has no interest therein, to pay for capital improvements or repairs, at least without the right to recover those payments from the proceeds of any sale. However, the important point is that the court should not bind the supporting spouse in advance to pay any “extraordinary” expenses that might be incurred at a later date. If extraordinary obligations do arise, whether the supporting spouse should be held responsible for all or part of those items should depend upon the facts and circumstances prevailing at that time.

The last sentence in subdivision 8(b) refers to the court’s discretion to make “such direction” even though the parties still reside together and the court refuses to grant the relief requested by the “other” spouse. This phrase is ambiguous. In Part A, it clearly refers to the court’s power to award alimony. In Part B, because of its location, it could be read as referring only to the court’s discretion to make a fragmented award, not the entire maintenance payment. This is not what was intended and, if read literally, would make little sense. The intent of the drafters was to allow the court, just as under prior law, to make a maintenance or child support determination even though no marital relief was granted. The authority for the court to award spousal and child support, though no marital relief is granted, is important if duplicative proceedings are to be avoided. Absent such power, the court would have no alternative but to require the parties to commence independent proceedings. It is far preferable, and less costly to the parties and the court system, to allow the court to proceed to pass on support questions, rather than compelling the parties to start all over, particularly where the proceeding might be in a different court, i.e., the Family Court, and might require the time and attention of an additional jurist, even under the individual assignment system. The appellate courts have now made clear that the court may indeed pass on support questions though no marital relief is granted. See, e.g., Forbush v. Forbush, 115 A.D.2d 335, 496 N.Y.S.2d 311 (4th Dept. 1985); Maulella v. Maulella, 90 A.D.2d 535, 455 N.Y.S.2d 103 (2nd Dept. 1982). The Forbush case overruled sub silentio the earlier, contrary holding in Erck v. Erck, 116 Misc.2d 113, 455 N.Y.S.2d 250 (Sup.Ct. Niagara County 1982). In Forbush, the Appellate Division reversed the trial court who was the same Justice who decided Erck and apparently followed that ruling in deciding Forbush. Further, as discussed in the Practice Commentary to DRL § 234, even though marital relief is granted, the court may still pass on questions as to the title and possession of property, though marital relief is refused. However, the court may not equitably distribute property where no marital relief is awarded.

It should also be noted that the last sentence in subdivision 8(b) also provides that such direction may be made notwithstanding the refusal to grant relief requested by the “other spouse”. This is clearly in error; the reference should be to a denial of relief to “either” spouse. Also, the three numbered clauses that follow this sentence in the Part A version do not appear in the Part B version. This is because the issue raised in Clause 1 is dealt with in Part B, subdivision 2 and the issue raised in Clause 2 has been rendered academic in view of the fact that marital fault is no longer an automatic bar to spousal support. The language of the Part A, Clause 3 is incorporated directly into the sentence in Part B.

The Second Department long had a rule which held that the courts should avoid orders which impose open-ended obligations, i.e., obligations without a financial ceiling. This rule has taken something of a battering in recent years.

Under the Child Support Standards Act, the court is required to order the non-custodial parent to contribute a pro rata share to reasonable child care, medical, and educational expenses. An order which requires the payor spouse to pay an open-ended share of such reasonable expenses complies with the statute and is immune from attack.Cassano v. Cassano, 85 N.Y.2d 649, 628 N.Y.S.2d 10, 651 N.E.2d 878 (1995); seeSaasto v. Saasto, 211 A.D.2d 708, 621 N.Y.S.2d 660 (2nd Dept. 1995) (direction to pay percentage of medical expenses for wife and children not an open ended obligation). As the Second Department has itself acknowledged, where a child is involved, the court should order the noncustodial parent to pay his or her pro rata share of the child’s medical, dental, pharmaceutical, psychiatric and/or psychological, child care, and school tuition expenses. Landau v. Landau, 214 A.D.2d 541, 625 N.Y.S.2d 239 (2nd Dept. 1995).

Thus, the doctrine against open-ended obligations has become limited to payments for the benefit of a spouse only (seeGulotta v. Gulotta, 215 A.D.2d 724, 627 N.Y.S.2d 428 (2nd Dept. 1995) ) and to items not within the ambit of the statutory child support “add-ons”. For example, the Third Department disapproves of open-ended obligations for “repairs and improvements”. Richards v. Richards, 207 A.D.2d 628, 615 N.Y.S.2d 784 (3rd Dept. 1994). The Fourth Department disapproves of open-ended obligations for “all basic utilities to maintain the marital residence”. Baker v. Baker, 206 A.D.2d 931, 615 N.Y.S.2d 549 (4th Dept. 1994), leave to appeal dismissed, 84 N.Y.2d 1026, 623 N.Y.S.2d 182, 647 N.E.2d 454, certiorari denied, 514 U.S. 1128, 115 S.Ct. 2002, 131 L.Ed.2d 1003. The First Department does not care for the rule against open-ended obligations, in any event. Lolli-Ghetti v. Lolli-Ghetti, 165 A.D.2d 426, 568 N.Y.S.2d 29 (1st Dept. 1991), appeal denied 78 N.Y.2d 864, 578 N.Y.S.2d 879, 586 N.E.2d 62. And the Second Department is not so against open-ended obligation as to refuse to enforce them where the parties agreed to them. Ware v. Ware, 193 A.D.2d 684, 598 N.Y.S.2d 532 (2nd Dept. 1993). The whole issue can be avoided by setting forth in the order, as to each expense item that is capable of being abused, the amount that court finds to be reasonable. SeeBagner v. Bagner, 207 A.D.2d 367, 615 N.Y.S.2d 737 (2nd Dept. 1994).
 
C236B:45: Modification

Subdivision 9(b) of Part B of DRL § 236 sets forth the governing principles in respect of modification of judgments, orders and decrees. At the outset, it should be noted that 9(b) makes no mention of modification of an award of equitable distribution or even a distributive award. The rationale is that those aspects are one-time property divisions not subject to later modification. Farsace v. Farsace, 97 A.D.2d 951, 468 N.Y.S.2d 751 (4th Dept. 1983). In Greenwald v. Greenwald, 164 A.D.2d 706, 565 N.Y.S.2d 494 (1st Dept. 1991), the court reaffirmed the principle that an equitable distribution determination is not modifiable based on post-judgment economic changes. In Greenwald, the husband moved to reargue the trial court’s determination and re-open the trial because two of his major assets had declined in value. The trial court’s denial of the motion was affirmed on appeal. The Appellate Division termed the post-trial changes irrelevant since, by statutory limitation, the last valuation date the court can use is the “date of trial”. DRL § 236, Part B (4[b]). Moreover, to allow post-trial changes in value to become a basis for modifying a property distribution would undermine the finality of judgments in matrimonial actions. See alsoKallins v. Kallins, 170 A.D.2d 436, 565 N.Y.S.2d 227 (2nd Dept. 1991) (evidence as to post-trial events which may have adversely affected the husband’s business held irrelevant).

The first sentence of subdivision 9(b) provides that the court may annul or modify a prior order as to maintenance or child support if the recipient is shown to be unable to be self-supporting or if there is a substantial change in circumstances, including financial hardship.

Subdivision 9(b) appears to suggest that the recipient’s inability to be self-supporting by itself warrants a modification, presumably an upward modification. This is of importance in cases where court grants maintenance but only for a limited period of retraining. The needy spouse could come in to court before the end of the period of support and ask for a further time to complete training. If a sufficiently convincing showing of inability to be self-supporting is made, the court might be persuaded to grant that request. The supporting spouse might be able to invoke the second phase (discussed below) to put all changes in circumstances before the court.

The courts will have to carefully balance competing interests. Needy spouses who are given support during retraining will be induced and encouraged to retrain with diligence if it is believed that the courts will not readily modify the previously set time limits. On the other hand, an overly rigid approach could jeopardize the rights of spouses who, for legitimate reasons, need further periods of time, perhaps because the court was too optimistic in the first place.

The court is also permitted to modify a maintenance or child support direction on the ground of substantial change in circumstances, including financial hardship. This is consistent with prior law.

As amended in 1987, the statute no longer permits the court to modify any child support arrears which accrued prior to the date of the application or to modify any prior order or judgment as to child support. The court may not reduce or annul maintenance arrears which have been reduced to judgment pursuant to DRL § 244. Arrears in maintenance, which have not been reduced to judgment, may be annulled or modified only if the defaulting party shows good cause for failing to make an application for relief from the judgment or order requiring the payments prior to the accrual of arrears. If the court finds that good cause for not making a prior application was shown, it must set forth the facts and circumstances it finds to be good cause, in a written decision.

The enactment of the Equitable Distribution Law has made some significant changes in the context of the enforcement, and modification, of spousal support provisions of separation agreements. With respect to agreements made before July 19, 1980, where the agreement did not merge into the decree, the court could increase spousal support if the supported spouse was unable to support himself or herself and is in actual danger of becoming a public charge but only to that extent. McMains v. McMains, 15 N.Y.2d 283, 258 N.Y.S.2d 93, 206 N.E.2d 185 (1965); Raines v. Raines, 80 A.D.2d 721, 437 N.Y.S.2d 140 (4th Dept. 1981). Where an agreement did not merge in the judgment and the supporting spouse’s financial condition has worsened, the court may modify the judgment downward but such modification would still leave the supported spouse with the right to maintain an action for breach of contract. Goldman v. Goldman, 282 N.Y. 296, 26 N.E.2d 265 (1940); King v. Schultz, 29 N.Y.2d 718, 325 N.Y.S.2d 754, 275 N.E.2d 336 (1971). The subsequent modification of the divorce decree does not divest the supported spouse of the right to sue on the contract for the difference between the reduced award and the amount provided for in the separation agreement. Kleila v. Kleila, 50 N.Y.2d 277, 428 N.Y.S.2d 896, 406 N.E.2d 753 (1980); Galyn v. Schwartz, 77 A.D.2d 437, 434 N.Y.S.2d 1 (1st Dept. 1980), modified on other grounds, 56 N.Y.2d 969, 453 N.Y.S.2d 624, 439 N.E.2d 340 (1982); Burtch v. Burtch, 98 A.D.2d 704, 469 N.Y.S.2d 100 (2nd Dept. 1983). In Galyn v. Schwartz, supra, for example, the wife commenced a proceeding in the Family Court to enforce the support provisions contained in a Mexican divorce decree which incorporated the parties’ separation agreement. When the Family Court reduced the husband’s obligations under the decree as a result of hardship, she thereafter commenced a plenary contract action. The Court held that such action was not barred by the wife’s prior election to seek enforcement in the Family Court under the decree.

A change in a divorce decree cannot modify a separation agreement absent a clear expression by the parties of such an intent. In Kleila v. Kleila, 50 N.Y.2d 277, 428 N.Y.S.2d 896, 406 N.E.2d 753 (1980) the separation agreement did not provide that a modification of the support and maintenance provisions of a divorce decree would also serve to modify the agreement. One portion of the agreement specifically declared that it was to survive any subsequent divorce decree obtained by either party and another provision stated that, though the support and maintenance provisions of the agreement could be incorporated by reference into the decree, they were not to be merged within it. The Court of Appeals held that the wife was entitled to recover against the husband upon the terms provided in the separation agreement, irrespective of the modification of the decree.

Even though the supported spouse may have a contract claim, the downward modification of the decree provisions would still be meaningful since it would protect the supporting spouse from the full panoply of enforcement devices that stand behind a matrimonial decree. SeeBuchman v. Buchman, 61 A.D.2d 973, 402 N.Y.S.2d 613 (2nd Dept.1978).

Just before the enactment of the Equitable Distribution Law, some courts, while recognizing the right of the supported spouse to maintain and prevail upon a breach of contract action, have attempted to achieve a measure of justice by restricting the supported spouse’s ability to collect more than the downwardly modified support. InMackey v. Mackey, 58 A.D.2d 806, 396 N.Y.S.2d 257 (2nd Dept. 1977), the court provided that its award of alimony and child support (reduced in favor of the husband) would be further reduced to the extent of any monies received by the wife as a result of income executions issued to enforce arrears under the separation agreement. If the husband was so impoverished as not to have any property, income execution might be the only means, open to the wife to collect any breach of contract judgment. Likewise, in S. v. C., 70 Misc.2d 19, 332 N.Y.S.2d 773 (Fam.Ct. Richmond County 1972), the court held that when any civil judgment for the differential between the reduced Family Court payments and the agreed payments pursuant to the agreement is being enforced, the Family Court’s order shall be reduced by the amount of any garnishment, wage assignment or income execution then in effect. Furthermore, should the plaintiff wife be disposed to levy execution on any judgment, the court said that shall be her absolute right, but she must understand that if and when she does, the Family Court will grant a further downward modification in pursuance of its obligation to keep its order at a level conforming to the financial situation of the parties.

The Equitable Distribution Law has attempted to address this issue. The second sentence of subdivision 9(b) of Part B of Section 236 of Domestic Relations Law provides that where, after Part B’s effective date (July 19, 1980), a separation agreement remains in effect, an order or judgment which incorporates the terms of the agreement may not be modified with respect to maintenance unless there is a showing of extreme hardship to one party. In other words, the needy spouse would have to demonstrate extreme hardship to obtain an upward modification and the supporting spouse would have to make a like showing to obtain a downward modification. The statute comes into play only where the agreement has been incorporated into the judgment and “remains in force”. This means that the agreement must not have merged with the judgment. Also, by virtue of the last sentence in subdivision 9(b), this provision is inapplicable to a separation agreement made before July 19, 1980.

In the event that a showing of extreme hardship is made, the court’s modification supersedes the terms of the agreement for such a period of time and under such circumstances as the court determines. This provision is entirely new and was designed to alleviate the unfairness that existed under former law. Subdivision 9(b) purports to allow the court to, in effect, suspend the contract for as long as necessary and to what extent necessary and, thus, preclude a contract claim. There is some question as to whether this is constitutional. InKleila v. Kleila, 50 N.Y.2d 277, 284, 428 N.Y.S.2d 896, 900, 406 N.E.2d 753 (1980), decided only a month and a half before enactment of the Equitable Distribution Law, the Court of Appeals indicated that “any attempt to confer upon a court of any jurisdiction within the United States broad powers to modify the terms of a separation agreement might well run afoul of constitutional limitations upon the State’s power to tamper with vested contractual rights.” Proponents of this provision argue that the state’s police power is broad enough on this important issue of public policy as to permit the State to interfere with even vested contractual rights. The answer remains to be seen.

While subdivision 9(b) provides that a separation agreement may be modified as to maintenance upon a showing of extreme hardship, it has been interpreted so as to permit modification of a stipulation entered on the record. The court held that, for purposes of this subdivision, there is no appreciable difference between a separation agreement and stipulation made in open court.Mutinelli v. Mutinelli, 114 Misc.2d 511, 451 N.Y.S.2d 980 (Sup.Ct. Nassau County 1982).

In Didley v. Didley, 194 A.D.2d 7, 605 N.Y.S.2d 685 (4th Dept. 1993), the court held that the statutory criteria for evaluating a pre-judgment agreement as to maintenance are inapplicable to review of a post-judgment agreement modifying a pre-judgment agreement. The court ruled that it is impossible to determine whether an agreement was unconscionable at the time of final judgment where the agreement was made years after the final judgment of divorce had been entered.

In Didley, the parties made a settlement agreement, incorporated into their divorce judgment, by which a company, of which the husband was the majority owner, was to pay certain monies each week to the wife and, in return, the wife would waive maintenance. Several years later, the husband sold the company and the parties entered into a written modification agreement under which the husband was to pay maintenance as long as he was “working”. When the husband’s employment terminated, both parties applied to the court for relief.

The Appellate Division held that the modification agreement could not be incorporated nunc pro tunc into the divorce judgment, at least not over the objections of one of the parties. The judgment, never having been modified, remained in place, with its waiver of maintenance. The judgment could be changed with respect to maintenance only upon a showing of extreme hardship. However, the modification agreement was a valid contract and enforceable as such. However, a hearing was ordered as to what the parties intended by “working” as used in the modification agreement.

It should be noted that in Plumb v. Plumb, 159 Misc.2d 880, 606 N.Y.S.2d 859 (Sup.Ct. N.Y. County 1993), the court held that a judgment of divorce could not be modified to conform to a post-judgment modification agreement with respect to maintenance. The underlying original agreement did not authorize the court to incorporate future amendments or modifications into the judgment and no facts were presented to show that modification was authorized on the ground of “extreme hardship”. While the parties presumably could have provided in the modification agreement that the judgment should be modified, they apparently did not do so and the court could not add terms that the parties did not agree to.

In Tuckman v. Tuckman, 112 Misc.2d 803, 447 N.Y.S.2d 654 (Sup.Ct. Rockland County 1982), the court stated that if the court exercises the authority conveyed by subdivision 9(b) by reducing maintenance, the party who is adversely affected by the modification is precluded from bringing a contract claim to recover the difference between the amount agreed to and the amount as modified.

The provisions of subdivision 9(b) were explored in Pintus v. Pintus, 104 A.D.2d 866, 480 N.Y.S.2d 501 (2nd Dept. 1984). There, in a stipulation spread on the record, the defendant-husband agreed to pay $175 per week in support to the wife for one year and $150 per week thereafter until she died, or remarried, or cohabited with another man on a permanent basis. The defendant-husband reserved, in the stipulation, “his rights under the Domestic Relations Law, Section 236 [Part B, subd. 9b] in the event of the loss of his job, disability, or retirement at age sixty-five to apply to the court for a change of circumstances under the provisions of Section 236 [Part B, subd. 9b].” Some three months after the making of the stipulation, the wife moved for enforcement of other provisions of the agreement and the husband cross-moved for a downward modification of the support provisions of the stipulation and the judgment into which it was incorporated, citing the fact that he had lost his job. While the trial court granted the husband’s application and suspended spousal support payments for the period of the husband’s unemployment, the Appellate Division reversed. The Appellate Division reasoned that, while the husband’s loss of employment was causing him strain and may have constituted a change in circumstances, the husband did not meet the “extreme hardship” test imposed by the statute. The husband’s gross earnings were down only slightly, as he was receiving unemployment benefits and substantial interest on bank accounts. Despite the loss of employment, which had occurred before, the husband still managed to maintain payments on his residence, to pay his legal expenses, to send his daughter to camp, and to maintain for the most part his existing standard of living. While the stipulation of the parties referred to a reservation of rights in the event of a “change in circumstances”, the Court found that this language did not compel the use of a lesser standard than the statutory test of extreme hardship.

Also relevant is the decision in Busetti v. Busetti, 108 A.D.2d 769, 484 N.Y.S.2d 873 (2nd Dept. 1985), which also involved a stipulation placed upon the record and incorporated into a divorce decree. There, the plaintiff-husband agreed to pay $125 per week in spousal support for a period of five years, commencing in 1982, with this obligation to be “absolute”. Two years later, the husband moved for a modification, alleging that his employment had been changed involuntarily, with a reduction in income, and that his former wife, who had been unemployed at the time of the stipulation, had earned a master’s degree and was now earning as much as he. Special Term denied relief, holding that because the husband had agreed that his obligation was to be “absolute”, modification was precluded. The Appellate Division reversed and ordered a hearing as to: (1) whether there had been a substantial change in circumstances; (2) if so, whether the plaintiff made a showing of extreme hardship, warranting modification of the judgment of divorce and supersedure of the decree; and (3) where the husband had shown good cause for failing to seek modification before arrears accrued. The Court held that, despite the agreement to make support obligations “absolute”, the court had the statutory power to modify the divorce judgment and to supersede the maintenance terms of the stipulation upon a showing of extreme hardship. However, the court noted, in a footnote, the potential constitutional issue regarding the State’s power to tamper with vested contractual rights, but did not rule on it as it had not been raised by the parties to the appeal.

The modification aspect, with respect to separation agreements, of subdivision 9(b) only applies to maintenance and does not apply to child support. Thus, in Voss v. Voss, 132 A.D.2d 545, 517 N.Y.S.2d 546 (2nd Dept. 1987), the court held that, pursuant to subdivision 9(b), the Family Court may supercede the terms of a separation agreement as to maintenance but may not supercede the provisions of the agreement as to child support. Hence, under Voss, a downward modification of the level of child support originally fixed by a separation agreement incorporated in a judgment or order does not preclude the payee spouse from maintaining a contract action for the difference between the child support originally fixed and that paid under the modification order.

Thus, it is clear that the statute’s scope, as respects possible modification of agreement terms, is limited to maintenance. While the court may modify the child support provisions of a judgment or court order, it may not modify the child support provisions contained in an agreement which was not merged into the judgment or order. Where the court modifies a judgment or order to increase child support above the amount set in an agreement, the agreement usually becomes irrelevant. However, where the court decreases the child support provisions of a judgment or order below the amount fixed in the agreement, the court may not deprive the custodial parent of the contractual rights of the agreement.Cefola v. Cefola, 231 A.D.2d 600, 647 N.Y.S.2d 810 (2nd Dept. 1996).

Nonetheless, the child support provisions of an “opt-out” agreement made pursuant to subdivision 3 of Part B remain subject to the court’s supervisory powers, as set forth in DRL § 240. A separation agreement may not effectively release either parent from the statutory duty to support children under the age of 21. See, e.g.Matter of Hoppl v. Hoppl, 50 A.D.2d 59, 376 N.Y.S.2d 524 (1st Dept. 1975). Agreements which purport to reduce or eliminate either parent’s statutory duty to support or which are silent as to child support are unenforceable. See, e.g.Matter of Jentoft-Nilsen v. Jentoft-Nilsen, 109 Misc.2d 12, 439 N.Y.S.2d 610 (Family Court Delaware County 1981).

In Boden v. Boden, 42 N.Y.2d 210, 397 N.Y.S.2d 701, 366 N.E.2d 791 (1977), the Court of Appeals ruled that child support provisions of a separation agreement could not be disturbed absent a showing of unanticipated and unreasonable change in circumstances. While the Equitable Distribution Law does not affect Boden, the Court of Appeals itself has severely limited it. In Brescia v. Fitts, 56 N.Y.2d 132, 451 N.Y.S.2d 68, 436 N.E.2d 518 (1982), the Court held that Boden applies only where the child’s needs are being adequately provided for and the dispute involves an effort to obtain a readjustment of the parents’ respective obligations, i.e., one parent seeks to have the other pay a greater percentage of the child’s needs. However, if the child’s needs are not being adequately met because of a change in circumstances, then a modification to increase child support may be obtained. The factors that may be considered in determining whether there has been a change in circumstances include increased needs of the child due to special circumstances or additional activities, increased costs of living which entail greater child care expenses, a parent’s loss of income or improved financial condition and the current and past life-styles of the children. 451 N.Y.S.2d at 72. In other words, if a child’s needs are not being adequately provided for, it is not necessary to establish, in order to obtain an increase in child support, that the changed circumstances resulted from an unanticipated or unreasonable change in circumstances asBoden seemed to suggest.

This being said, pursuant to Family Court Act Section § 413-a(1), cost-of-living review and adjustment is available where a child support order is made on behalf of a child in receipt of public assistance or where child support enforcement services have been requested. The cost-of-living review procedure is not available to cases involving parties who are not in receipt of public assistance and where enforcement is not being undertaken through the Support Collection Unit. In this respect, the cost-of-living review parallels the 36-month review and adjustment procedure originally provided for in the Child Support Standards Act. The substantive principles change depending upon the method of support collection. To illustrate, if child support was established by a court, with no agreement of the parties, and payment is not enforced through the Support Collection Unit, then modification can be had only upon affirmative court application, based upon change in circumstances. If child support was established by an agreement incorporated into a divorce judgment, and payment was not being enforced through the Support Collection Unit, then modification could be obtained only upon compliance with Brescia/Boden standard, involving an assessment of whether child’s needs are being adequately met. Brescia v. Fitts, 56 N.Y.2d 132, 451 N.Y.S.2d 68, 436 N.E.2d 518 (1982); Boden v. Boden, 42 N.Y.2d 210, 397 N.Y.S.2d 701, 366 N.E.2d 791 (1977). If the child’s needs are being adequately met, a cost-of-living adjustment would be available only if provided for in the agreement. In contrast, if payment is being made through support collection, it would appear that cost-of-living review of the support order would be available, in the absence of an explicit waiver of the right to seek review. No showing of changed circumstances is required as a predicate for cost-of-living review. Family Court Act § 413-a(3)(c).
 
C236B:46: Practice Considerations

As a pleading matter, it has been held that there is no “cause of action” for equitable distribution. DiGennaro v. DiGennaro, 108 Misc.2d 721, 438 N.Y.S.2d 703 (Sup.Ct. Suffolk County 1981). Equitable distribution, distributive awards, insurance policies, are forms of “ancillary relief”, which should be set forth on the face of the summons (see DRL § 232[a]) or in the ad damnum clause.

It is not necessary that venue be fixed in the county in which the parties own realty. The court has jurisdiction under DRL § 234 to determine any question of title or possession arising between the parties, and may do so even if the property is located in another county. Madden v. Madden, 78 A.D.2d 874, 433 N.Y.S.2d 30 (2nd Dept. 1980); Orsano v. Orsano, 108 Misc.2d 880, 438 N.Y.S.2d 930 (Sup.Ct. Nassau County 1981). The court may also pass upon equitable distribution of out of state realty. Miller v. Miller, 109 Misc.2d 982, 441 N.Y.S.2d 339 (Sup.Ct. Suffolk County 1981).

CPLR 503(a) generally permits venue of a civil action in the Supreme Court to be placed in a county in which any party to the action resides. On the other hand, CPLR 507 provides that, where the judgment demanded in an action would affect title to, or the use, possession or enjoyment of real property, the action must be venued in the county where the real property is located. In Suchy v. Suchy, 126 Misc.2d 1094, 484 N.Y.S.2d 991 (Sup.Ct. Schoharie County 1984), a husband, resident in Schoharie County, was unsuccessful in changing venue of his wife’s divorce action from Westchester County to his home county. He failed in his effort to claim that Westchester was an improper county, since his wife did reside there, and also failed to show that the convenience of witnesses and the ends of justice required a change in venue. He then argued that, because the parties owned a jointly owned residence in Schoharie County, the action had to be venued there under CPLR 507. Though the court noted that the husband’s position was supported by some caselaw, it found it inappropriate to blindly follow the provisions of CPLR 507. Matrimonial actions, noted the court, involve issues other than real property. To venue an action in a county simply because the parties owned property there could lead, said the court, to having a trial in a distant county, away from where the parties and their children reside, merely because the parties jointly owned a vacation home.

There is no right to have the jury, rather than the court, pass on such issues as equitable distribution, maintenance, custody and child support and exclusive occupancy. Mandel v. Mandel, 109 Misc.2d 1, 439 N.Y.S.2d 576 (Sup.Ct. Queens County 1981). The right to a jury trial is limited to the grounds for divorce (DRL § 173) and once that issue is decided the jury has no further province. This is particularly true where the ancillary relief is equitable in nature.

That court is not necessarily the Supreme Court. The Supreme Court may, on its own motion or on motion of either spouse, refer an application for support, maintenance or property distribution to the Family Court. Family Court Act § 464(a). This provision was designed to accommodate the practice of certain upstate communities but, on its face, is applicable throughout the state. No guidelines are set forth for determining when a reference should be made. In view of the heavily congested calendar of the Family Courts in New York City, it has been held that the equitable distribution aspects of an action should not be there referred. Reardon v. Reardon, New York Law Journal, July 23, 1981, p. 12, col. 1 (Sup.Ct. Kings County).

There is an interesting question as to whether the Legislature could constitutionally provide for referral of equitable distribution issues to Family Court. Article 6, Section 13(c) of the State Constitution, which provides for when matters may be referred from Supreme Court to Family Court, provides that referrals can be made in habeas corpus proceedings and, in matrimonial actions, applications to fix temporary or permanent support or custody or to enforce or modify support or custody orders. Since equitable distribution is not a method of support but a division of property, it may be outside the list of matters in which referral to Family Court can be made. On the other hand, to save the constitutionality of the statute, equitable distribution may be considered, solely for the purpose of Article 6, Section 13(c), as sufficiently akin to support proceedings.

Section 464 of the Family Court Act, in cases of referral, grants the Family Court the jurisdiction to determine the application with the same powers as the Supreme Court.

As Reardon, supra, demonstrates, the court may refer the issues to a special referee but it is suggested that such a referral be directed only where the parties consent. The right to have a judge determine the equitable distribution issues, by hearing the parties and witnesses first hand, is too important to be lost involuntarily.

All of this discussion is pertinent because of the burdens that complicated matrimonial cases present to the court system. Matrimonial actions under the Equitable Distribution Law can require extended, if not protracted, trials. In the interest of alleviating the burdens of hard-pressed trial judges, efforts have been made to find alternatives to having matrimonial actions tried before a judge.

One possible alternative is to assign, where constitutionally permissible, judges from other courts to sit as Acting Supreme Court Justices. When so assigned, the Acting Supreme Court Justices can preside over Supreme Court matters, including matrimonial actions, with the same powers as possessed by the regular, elected Supreme Court Justices. Another alternative is to refer the equitable distribution issues, and other ancillary questions, to the Family Court. However, as discussed above, this approach may not be desirable in areas where the Family Court itself has a congested calendar and may also be constitutionally suspect.

A third alternative is to have matrimonial actions tried before a referee or judicial hearing officer. CPLR 4301. A judicial hearing officer is a former judge who has retired or otherwise left the bench and is certified by the court administrators as mentally and physically able to perform judicial duties. See CPLR 105. The parties may consent to have their case heard and determined by a referee or judicial hearing officer. CPLR 4317 (subd. a). If they do, the referee or judicial hearing officer determines the action with the same powers as a Supreme Court Justice and the determination may be reviewed only by appeal. SeeLipton v. Lipton, 128 Misc.2d 528, 489 N.Y.S.2d 994 (Sup.Ct. Nassau County 1985), affirmed, 119 A.D.2d 809, 501 N.Y.S.2d 437 (2nd Dept. 1986); Colodner v. Colodner, 138 Misc.2d 66, 523 N.Y.S.2d 939 (Sup.Ct. N.Y. County 1987). However, where either or both of the parties refuse to consent to have the case determined by a referee or judicial hearing officer, the court has no authority to refer the case to a referee or judicial hearing officer for determination. CPLR 4317 (subd. b); Schanback v. Schanback, 130 A.D.2d 332, 519 N.Y.S.2d 819 (2nd Dept. 1987).

The court may use law assistants to preside in uncontested cases but a law assistant may not be empowered to determine any contested action. See Judiciary Law Section 251-a; Scinta v. Scinta, 129 A.D.2d 262, 517 N.Y.S.2d 645 (4th Dept. 1987). The court may, however, refer cases to a referee or judicial hearing officer to hear and report. But, if it does, the report is not binding and must either confirm or reject the report. See CPLR 4320; 4403.
 
C236B:47: Enforcement

In DRL § 236, Part B, subdivision 9(a), the statute provides that all orders or judgments in matrimonial actions shall be enforced pursuant to CPLR 5241 or 5242, or in any other manner provided by law.

CPLR 5241 and CPLR 5242 provide for income execution for support enforcement. CPLR 5241 authorizes the issuance of income executions by various persons, including the attorney for the creditor spouse, without having to obtain a prior court order. CPLR 5242, a companion statute, permits the court to enter an income deduction order for support. The difficulty is that CPLR 5241 and 5242 are available only to collect support. Notwithstanding the sweeping language in DRL § 236, Part B, subdivision 9(a), CPLR 5241 and 5242 may not be used to enforce non-support obligation, such as distributive awards and counsel fees. SeeMaloney v. Maloney, 140 Misc.2d 852, 532 N.Y.S.2d 203 (Sup.Ct. Richmond County 1988).

Orders and judgments may also be enforced by “any other manner provided by law”. The primary enforcement devices include: DRL § 243 (sequestration and security, but confined to maintenance and support); DRL § 244 (judgment for default in paying money, which judgment can then be enforced by ordinary income or property execution); and DRL § 245 (contempt). Professional, occupation, driver’s, and recreational licenses may be suspended or revoked based upon non-payment of support. See DRL §§ 244-b, 244-c, 244-d.
 
C236B:48: Interim Property Restraints

While the commencement of a matrimonial action serves to terminate the acquisition of marital property, that property will not be distributed until the action is tried and a judgment rendered by the court. The process of moving a matrimonial action from commencement to trial may take months, and, in some cases, years. But property may not stay static during the litigation process. Apart from changes brought about by market factors or by good-faith decisionmaking, in some cases, there may be a risk that one spouse will secrete, transfer without consideration, or dissipate assets so as to preclude an effective distribution of that property following trial.

Leibowits v. Leibowits, 93 A.D.2d 535, 462 N.Y.S.2d 469 (2nd Dept. 1983) established the rule that CPLR Article 65 (relating to injunctions) is not exclusive and that, under DRL Section 234, the matrimonial courts may impose restraints, during the pendency of the litigation, upon the ability of a party to dispose of assets. But the rule also became established that interim property restraints could not be obtained for the mere asking; a showing was needed that the spouse sought to be restrained was attempting to, or threatening to dispose of marital assets so as to prejudice the movant’s claim for equitable distribution. See, e.g., Pagello v. Pagello, 17 A.D.3d 428, 793 N.Y.S.2d 447 (2nd Dept. 2005); MacKinnon v. MacKinnon, 245 A.D.2d 676, 665 N.Y.S.2d 121 (3rd Dept. 1997); Guttman v. Guttman, 129 A.D.2d 537, 514 N.Y.S.2d 382 (1st Dept. 1987). Further, in some cases, the courts were concerned that the imposition of an unnecessary restraint might limit the titled spouse’s legitimate efforts to manage and preserve the marital estate and, therefore, do more harm than good. Joseph v. Joseph, 230 A.D.2d 716, 646 N.Y.S.2d 167 (2d Dept. 1996). These principles are discussed in more detail in Practice Commentary C234:5 to DRL Section 234.

In a significant change, in 2009, the Legislature has, in effect, overturned these cases and directed that an “automatic order” restraining certain behaviors go into effect at the very outset of matrimonial litigation. L.2009, ch. 72, effective September 1, 2009. The statute is located in Section 236, Part B, subdivision 2, paragraph b. Thus, the key statutory provision is no longer Section 234, the general authority for the matrimonial court to deal with property, but in the Equitable Distribution Law itself. Moreover, because the statutory provisions for “automatic orders” apply to all matrimonial actions listed in Section 236, Part B, subdivision 2, the restraining provisions apply even to actions in which equitable distribution is not available, such as separation actions.

The statutory restraining provisions apply to actions commenced on or after September 1, 2009; thus, actions commenced prior to that date remain subject to the provisions of former law.

Under the 2009 statute, the restraining provisions go into effect at different times, depending upon whether a party is plaintiff or defendant. As to plaintiff, the restraint goes into effect upon the filing of the summons or the summons and complaint. This is because the plaintiff, as the filing party, is presumably aware of the consequences of filing the action. The statute provides that the restraints go into effect as to the defendant upon service of the “automatic orders with the summons”. DRL § 236, Part B (subd. 2[b]). Service is what triggers the defendant’s restraint because the defendant may not otherwise know the existence of the case, let alone of the statutory restraints that go into effect with the case. But the “automatic order” is not an order of the court at all; it is a statutory directive. Since there is no “automatic order” to serve, the Chief Administrative Judge has adopted a rule that requires that plaintiff serve, simultaneously with the summons, a notice of the existence of the automatic order. 22 N.Y.C.R.R. § 202.16-a. The court rule provides a form which essentially tracks the statutory language and which form is to be substantially complied with.

The “automatic order” applies equally to both parties; the only difference is that plaintiff’s restraint goes into effect upon filing; the defendant’s upon service. It is not entirely clear what the applicable remedy is for a violation of an “automatic order”. The statute does not provide for a penalty. While the statute calls its restraining provision an “automatic order”, it remains to be seen if a party can be held in contempt of an “automatic” order which has not actually been issued by a court. It would seem, though, that a matrimonial court could treat a violation as wrongful economic conduct that should be taken into account in the final equitable distribution or support award. Until the issue of sanction is addressed by the courts, it may be advisable for counsel to seek an actual court order.

An actual court order served on third parties may also be necessary to put third parties on notice of restraints and to subject those third parties to contempt in the event of disobedience. Neither the 2009 statute nor the court rule provides for service of the “automatic order” or notice thereof upon third parties. But the fact that certain restraints are now the legislative norm may encourage courts to grant, as a matter of course, an actual court order that contains at least the statutory restraint provisions. Where a spouse controls a third party corporation or other business entity, it may be that the automatic order binding a spouse may bind that spouse’s actions in controlling the third party are limited as well. See Ricatto v. Ricatto, 4 A.D.3d 514, 772 N.Y.S.2d 705 (2nd Dept. 2004) (since temporary restraining order precluded husband from taking any action as member of limited liability company that would diminish the value of his interest therein, and husband was 50% member, the order effectively barred the entity and, as such, it was proper for wife to file the restraining order with the City Register of the City of New York; while the entities and the other 50% member were not parties to the action, they had standing to appeal the order, though their appeal was denied on the merits).

A court order will also be necessary in those cases which were already pending as of September 1, 2009. However, the fact that there is now a statutory preference for certain restraints may ease the standard that must be met to obtain a court restraining order.

There are five statutory restraints:

1) neither party may sell, transfer, encumber, conceal, assign, remove or dispose of any property, without the written consent of the adverse party or court permission, except “in the usual course of business”, for “customary and usual household expenses” or for “reasonable attorney’s fees” in connection with the matrimonial action;

2) neither party may transfer, encumber assign, remove, withdraw or dispose of any tax deferred funds, stock or other assets in any individual retirement account (IRA), 401k account, profit sharing plan, Keogh account, or other pension or retirement account; each party must “refrain from applying for or requesting” the payment of retirement benefits or annuity payments of any kind, without the written consent of the adverse party or court permission;

3) neither party may incur any “unreasonable debts”, including by borrowing against credit lines or encumbering assets or “unreasonably” using credit cards or cash advances against credit cards, except “in the usual course of business”, for “customary and usual household expenses” or for “reasonable attorney’s fees” in connection with the matrimonial action;

4) neither party may cause the removal of the adverse party or any children from any existing medical, hospital or dental insurance coverage and each must keep any such coverage in full force; and

5) neither party may change the beneficiaries of any existing life insurance policies and each must keep existing life insurance, automobile insurance, homeowners and renters insurance in full force. DRL § 236, Part B (subd. 2[b]).

Under a statuatory amendment, pensions in pay status, meaning being paid to retirees, are not restrained.

It should be noted that, in contrast to prior law where courts were generally reluctant to impose restraints on the disposition of separate property, see Hertzler v. Hertzler, 109 Misc.2d 16, 439 N.Y.S.2d 590 (Sup.Ct. Suffolk County 1981).

The statutory restraints apply to property generally, without regard to whether the property is marital or separate.

A number of issues are apparent on the face of the statute.

With respect to the first restraining provision, each party remains free to transfer or dispose of assets “in the usual course of business” and for “customary and usual household expenses”. There may be wide disagreement, and room for argument, as to whether particular conduct falls with the “usual course of business”.

For example, under prior law, where a restraining order permitted the husband to encumber assets in the “ordinary course of business,” the allegation by the wife that the husband used his life insurance as collateral for a business loan was held insufficient to make out a prima facie case for contempt. Renner v. Blatte, 170 Misc.2d 579, 650 N.Y.S.2d 943 (Sup.Ct. N.Y. County 1996). The court noted that businesses borrow money all the time and that it is not unusual for the personal assets of the principals of a business to be pledged as security for a business loan. Since the wife had not shown that the business loan was not legitimate, she failed to make out a proper case for the invocation of the contempt remedy; all that she had shown was conduct consistent with what was allowed under the order. However, rather than deny the request for contempt outright, the court denied without it prejudice pending trial, so as to give the wife the opportunity to show that the proceeds of the loan were not used in good faith to further the husband’s business. Of some interest, while the new statutory restraining provisions do not specifically prohibit borrowing against insurance policies, to the extent that insurance policies are property, it may be said that such borrowing is within the scope of the restraint.

Likewise, there may be disputes about whether household expenses are “customary and usual”. It is not clear whether “customary and usual” is to be viewed from the particular perspective of the parties’ standard of living or from some sort of objective standard. The language employed seems distinct from “reasonable”. A reasonable expense may not be “customary” and “usual”, such as a one-time major household repair. Conversely, a “customary” and “usual” household expense may, perhaps, not be objectively reasonable.

The authorization for parties to dispose of assets to pay for “reasonable” attorneys fees is noteworthy, too. First, the fees must be in connection with the matrimonial action. While it could be that payment of legal fees for other matters might be a “usual course of business” expense, there may be issues where the legal expenses are personal, rather than business-related, such as legal fees incurred in connection with defense of criminal charges, perhaps even criminal charges brought by reason of allegations of domestic violence. Moreover, the legal fees paid must be “reasonable”. Again, it is unclear whether the standard by which reasonableness will be measured is a subjective one, keyed to the circumstances of the individual case, or a more objective one.

The general prohibition against a party seeking to apply for or request payment of pension or annuity benefits assumes that the party has not already retired or requested payment of pension or annuity benefits. If a party has already begun receiving payments, pursuant to a pre-action request, it is not a violation of the prohibition to continue to receive payments.

The statute restrains the incurrence of “unreasonable” debt, but the incurrence of debt is permitted if it is in the “usual course of business”, or for “customary or usual household expenses” or for “reasonable” attorney’s fees in connection with the matrimonial action. Again, the courts will have to sort out what is an “unreasonable debt”, if not incurred for a permitted purpose.

The statute requires each party to maintain existing insurance policies in effect, apparently without regard as to whether the coverage benefits the other party or the children of the parties.

The statutory restraints may be terminated, modified or amended by order of the court. The effect, however, appears to put the burden on the restrained party to seek relief, as opposed to prior law where a restraint had to be specifically requested. In addition, the statute permits the parties to agree to terminate, modify or amend the “automatic order” by written agreement, fully executed and duly acknowledged. In those courts, in the First and Second Department, which recognize the validity of in-court stipulations, it would appear that the parties, through counsel, could stipulate to such termination, modification or amendment on the record in the presence of the court. See discussion in Practice Commentary C236B:18. In the absence of an effective agreement between the parties, a motion is required.

The new statute in effect returns the law to where it was in the early days of equitable distribution when it was held that, as a matter of practice, the court should routinely restrain any abnormal disposition of the parties’ assets and that, absent prior court permission, only transfers in the regular course of business or personal affairs should be permitted. See Froelich-Switzer v. Switzer, 107 Misc.2d 814, 436 N.Y.S.2d 123 (Sup.Ct., N.Y. County, 1980).

Cases decided prior to the 2009 enactment may be relevant, not only in cases not subject to the statute, but to cases in which a party seeks to impose a restraint not specified by the statute and to cases in following efforts to terminate or limit the statutory restraints.

Footnotes
	
1
	
July 19, 1980.

McKinney’s D. R. L. § 236, NY DOM REL § 236
Current through L.2022, chapters 1 to 618. Some statute sections may be more current, see credits for details.
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